Università della Svizzera italiana Faculty of Communication Sciences Discount Effect on Consumers’ Perception in Luxury Market Master Thesis of Fergan Kitaplı


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Page 1: Thesis

Università della Svizzera italiana

Faculty of Communication Sciences

Discount Effect on

Consumers’ Perception in

Luxury Market

Master Thesis


Fergan Kitaplı


Thesis Supervisor: Prof. Reto Hofstetter

Academic Year: 2014-2015

Handing Date: 07/2015

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Discounts and lower priced products or services may be seen as far away notion from

luxury world traditionally. But in our digital age, as everything, definition of luxury,

its global extent, its customers’ expectations, their different ideological point of

views, requests of businesses are also changing and marketers have to think outside

the box. While essential luxury fashion brands’ companies provide certain level of

status and exclusiveness to their brands and their customers, they should be aware that

discount applications sometimes might be effective strategy when they are applied

properly and creatively. To answer our research question which is ’Does discount

create negative effects on consumers’ perception in luxury market?’ we have made a

conceptual research that includes review of existing literatures and finally, we have

concluded that in luxury market, discounts may be applied to entry-level products,

end-of-season products, online flash selling items, line extension products that

includes accessible items, pop-up stores to target conformist people, excursionists,

day-tripper customers under favor of democratization of luxury and also to their loyal

customers in customized ways without creating negative perceptions on customers’

mind. Foremost, it should be known when and how to implement these discount

strategies to increase the companies’ financial position and customers’ pleasure

without leaving the luxury line.

Keywords: luxury, status, conspicuous consumption, discount, pricing, and strategy


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Abstract................................................................................................................................ 2

Introduction........................................................................................................................ 4

Literature Review............................................................................................................. 6

Methodology..................................................................................................................... 56

Research Overview.................................................................................................................. 57

Research Design....................................................................................................................... 57

Results................................................................................................................................ 59

Discussion......................................................................................................................... 64

Limitation and Assumptions................................................................................................ 77

Managerial Implications........................................................................................................ 78

Conclusion......................................................................................................................... 83

References......................................................................................................................... 84

Appendices........................................................................................................................ 92


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This thesis examines the discount’s effect on consumer perception in mainly luxury

fashion market. It has been given several implications to managers to better

understand their customers in the luxury market. Our research question is ‘’Does

discount create negative effects on consumer’s perception in luxury market?’’ This

question concerns many people who pay billions of dollars in luxury industry and also

concerns many marketers who work in the industry to understand their customers’

point of view and increase consumer satisfaction to create more successful business in

long term.

This is a conceptual thesis that was structured by reviewing existing literature within a

specific domain. Various articles from journals such as Journal of Marketing, Journal

of Consumer Research, Journal of Revenue and Pricing Management, and Journal of

Market Research were examined to reach confidential and informative results for

industry experts. In addition to give realistic examples from today’s luxury world,

several brand names were used such as Louis Vuitton, Marc Jacobs, Chanel, Coach

and Richard Mille etc.

‘’Money is society’s language and luxury is its grammar’’ as (Kapferer & Bastien,

2012) has stated in their luxury strategy book. According to this statement, we can see

that monetary values and luxury are an inseparable whole. Thus, many relations

between money and luxury can be built as it was built in this thesis based on discount

effect on luxury consumers’ perception.

Whether it is fashion and accessories, leather goods, fragrance, skincare, cosmetics,

wines, spirits, timepieces, jewelry, automobiles, private jets, hotels, home decoration

or concierge services, the supply of luxury is currently incessant. (Okonkwo U. ,

2009) (See Figure ix)

The reason behind to focus on discount effect in luxury is that the industry is growing

inconceivably and marketers need to have a command every single detail of effective

strategies in the luxury industry. The luxury market was estimated at over €200 billion

in 2012 by (Bain&Co.) But at this point, we need to understand the reasons behind

this growth. First of all, amount of rich people and ‘cost of living extremely well’

index, which was presented in Forbes 2011 are going up. Now, more people want to

own these luxury products even if they’re day trippers, companies have to target


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them. Also, luxury industry has opened its doors to less rich people as we will be

called excursionists, who do not want to spend a lot of money but have high desire to

acquire luxury goods.

Even if we say luxury has to be something exclusive, now we see that it goes also for

the masses. (Silverstein & Fiske, 2013) Higher real income, rising home equity, cash

windfalls, courtesy of discount retailers, the role of women and a changing family

structure, higher divorce rates, higher level of tastes, education, worldliness, greater

emotional awareness, access to flexible supply chain networks and global resources

have made luxury more attractive and desirable than ever before.

As (Kapferer & Bastien, 2012) has mentioned, luxury should not be accessible by

everyone and it should protect luxury’s inaccessibility in some details but as it may be

seen, there is a dilemma between discount and luxury. We have explained this

dilemma through special implementation of discounts in luxury with all the respect of

luxury strategy. The challenge for luxury brands today are that transparency and high

accessibility of the new luxury while protecting their positioning as exclusive and


Before we mention effective discount strategies, we need to understand what is the

definition of luxury and what are the differences between luxury, fashion and

premium items.

This thesis examines also who are the consumer of luxury market, their expectations

from brands and their criteria that are used to shape their perceptions on their final

purchase decisions. These decisions vary one country to another. For instance in

western countries, especially women regard rarity in luxury while in far east countries

women desire for widespread luxury items. Also, we have mentioned briefly

counterfeit consumption, its customers, the reasons they buy these goods. Counterfeit

market is directly related to luxury market, its pricing strategies and our research


Another important issue for the companies is to select appropriate business model and

the way of implementation of their discount strategy according to the model.

According to the literatures that were analyzed along the whole process, we found that

luxury brands may apply some discounts to their products and services through line

extension, as Armani did with Armani Jeans, Armani Exchange, to extend their price

ranges to attract more consumers. Also, brands may prefer to set lower prices for their

entry-level products which target excursionists or young people who have less income


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but possibly will have loyal customers in the future because of their high interest. To

increase loyal customers’ pleasure, brands may offer customized discounts that

provide future purchasing after they leave the store gratefully. As we live in digital

age, brands may benefit from online selling which may offer discounts for season-end

products for very limited time to reduce their inventory without exiting the border of

luxury rules.

In this thesis, it has been shown that there are some discount methods that may be

effective in long term for luxury brands regarding to our research question. Marketers

should keep the doors open to price reductions or discounts before they stand

completely against these strategies. Because there are several discount examples that

increased brands’ return on equity and companies’ profitability in long term as it is

going to be presented via financial results.

In literature review, many journals, articles, webpages have ben scanned and then

selected the most decent ones to build our conceptual conclusion. This thesis can be

confidential resource for further conceptual or empirical researches about luxury

world and its different pricing strategies to build or sustain a successful business.

Different pricing applications and their effects on consumer perception have not been

analyzed together in one research. This separates our research from the others because

of its versatility about luxury market.

Literature Review

There are several related publications of researches that may be applied to our

research question at hand. Most of them are related to current trends and

developments in luxury market and they’re used to attain a respectable conclusion

with confidential journals, books, newspapers and research results that were

conducted by credible institutions.

It can be seen clearly that consumer and brand borders are blurring when the notion of

luxury is discussed, thus, researchers and luxury managers cannot just defend strict

proposition such claims luxury managers’ focus primarily is on the affluent

(Seringhaus, 2002) Alternative approaches must be considered that contain different

customer types, business needs, long run financial requirements, cultural and global

changings. (O'Reilly, 2005)


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In the sight of different authors’ ideas, existing literature has been given

comparatively to reveal different ideas and to clearly explain the different

implications of luxury strategies that fit to nature of the market and different pricing

strategies to answer our research question and also to create a unique concept.

In the recent history, there has been growing interest about the luxury marketing

literature (Turong, McColl, & Kitchen, 2009) Over its several dimensions, here are

the topics that is going to be explained with several literatures in this section: the

nature and definition of luxury (Catry, 2003) (Dubois & Paternault, 1995) (Veblen,

1899); competitive structure in the luxury market regarding to democratization of

luxury (Twitchell, 2001); expanding the market while retaining or assuring the

luxury’s high status; (Catry, 2003); (Silverstein & Fiske, 2013) and trading up for

luxury goods; conspicuous consumption generally that referred to prestige-seeking

consumers’ behaviors; online platforms for luxury items’ flash selling and

counterfeiting in the luxury market.

(Bain&Co, 2012a) has reported that the luxury market and its characteristics have

almost completely changed in less then last twenty-year. Before two decades, whilst

the industry had comprised mainly single-brand and family owned companies as a

total of more than 50 percent of personal luxury goods sales, nowadays, it comprises

multi-brand and publicly owned groups. However, (Hilton, 2004) has interpreted this

process differently and has stated the new way of luxury as a consumption way that

has morally changed nowadays at the same time creating important challenges for the

researchers and managers regarding to ethics and current consumer society. Even

though the luxury argument have come to a close at the end of 18 th century, these

arguments have left a significant heritage or tradition for the moralization of

consumption that defend economic act cannot be inconceivable out of ethical and

political structure of the society. As the requirement of natural transformation of the

luxury, nowadays, luxury also have come to the cheap standardization of property of

mass manufacturing while it serves for opulence and wealthy. Also this new luxury

have represented an aesthetic and puritanical to its new environment pontificated

destroy appreciation and the ability of the consumer to foster taste, discrimination,


With regard to this structure of the luxury market, (Som A. , 2014) has commented on

the structure of the new luxury market with Coach example. For more than ten years,

luxury market has changed rapidly and has given more places to younger people


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while offering more accessible luxury items. Coach and its competitor brands such as

Michael Kors, Marc Jacobs, Kate Spade etc. have seen the opportunity and taken the

advantage of this growing market while offering high-quality and affordable luxury

fashion items.

Differently from the traditional luxury brands, these brands have chosen to balance

between ‘desire to be exclusive’ and ‘desire to reach’ out and ‘attract new customers

with more accessible items’. When we assess how they achieved to build this delicate

balance, the author’s research has shown that historic dimension of this new luxury

plays a significant role while new luxury brands are building the image of their brands

with desirability and exclusivity. When, for instance, Coach has started to make a

business without even having a true luxury label, it has had a relatively long history as

it has produced aspirational items that has desired by many consumers. When the

brand’s history has been analyzed; the first Coach high-quality, leather and

handcrafted handbag was produced in their NY loft in 1941. Even though it was not a

true luxury for many people, it was a timeless and expensive item because of its long

lasting establishment. According to related research, they were one of the first brand

that have experienced the paradox, which is more you have been desired, the more

you would sell in the luxury market. But the more you sell, the more you lose your

desirability. In luxury market, brands get their luxury status with relation to their level

of exclusivity and consequently Coach also have been caught into this dilemma that

contains the common contradiction between the traditional luxury and accessible

luxury when it is compared to its European competitors such as Gucci and Prada.

According to their experience, Coach has learned something very well; Gucci and

Prada has been better overtime on building a dream factor. When the time pass and

new type of luxury, which aims to be more accessible to many more people, has

boosted the market, it has seen that the dream factor is the most important aspect to

compete with these huge luxury houses, out of these that define a luxury brand’s

status. However, Coach has built its own dream factor by repositioning the brand like

an American lifestyle brand and as one of the Coach stylist Reed Krakoff explained

this as this new American luxury includes products that have an extraordinary

aesthetic and attractive price point. The author have also noted that to reach the true

luxury label as European luxury brands, Coach has focused to produce aspirational

items that includes its founder Bonnie Cashin’s designs in the collection with

relatively higher price tags because of their willingness to emphasis on the rich and


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long history of the brand. Coach has also positioned their stores closer to other luxury

labels in major cities, including a flagship store on Madison Avenue, across the street

from the Louis Vuitton flagship. They’ve managed to disturb LVMH, which is a good

sign that their strategy has worked effectively.

In addition to this, Coach has been related with its core DNA while they have

balanced successfully being traditional luxury and being accessible to many

consumers. It is quite difficult process to manage for many luxury fashion brands in

the market. It can be interpreted as an outstanding example for our century that

constrains luxury brands to balance being true luxury and increasing their


After this short introduction to the new type of luxury with a real brand example, the

concept of ‘conspicuous consumption should be mentioned. (Veblen, 1899) have

brought the term of ‘conspicuous consumption’ to the literature with his theory of

leisure class. Veblen’s statements was based on the thinking that, when the wealth

spreads, customers’ behaviors are driven by ‘the attainment of esteem’ and ‘envy of

fellow men’ not by subsistence or comfort. (Yeoman & Beatile, Luxury markets and

premium pricing , 2006) According to Veblen’s theory, we can see clearly that luxury

is completely different than the traditional consumer marketing. Because in traditional

marketing, when prices rise, quantity demanded can be expected to decline. When

prices fall, quantity demanded can be expected to rise. The normal negative

relationship between price and quantity demanded is reflected in the downward slope

of demand curve. (Case & Fair, 1998) But it happens oppositely in traditional luxury

marketing because of its other priorities that come before raising its market share.

Similarly (Heine, 2009) has taken the cues from Veblen and by using Reparatory

Grid Technique, has interviewed 31 heavy luxury customers and have developed 5

luxury brand personality dimensions; modernity, eccentricity, opulence, elitism and

strength. Modernity describes the temporal perspective of a brand; eccentricity

reflects how far the brand is from accepted social norms; opulence is described as the

level of conspicuousness of the symbols of wealth and elitism, describes the level of

status and exclusivity displayed by the brand; finally, strength, describes the level of

toughness and masculinity offered by the brand. They are manifested by premium

prices, craftsmanship, heritage, rarity, aesthetics, specialty and symbolism that

support the idea of protecting the luxury from majority with a high level of exclusivity

without giving support to our research question. However, qualification and


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exclusivity require more than higher prices and elitist approach in luxury market. As it

has been stated by (Kapferer & Bastien, 2012), luxury is about knowing how to

spend, rather than having spending power as common false consciousness. For

instance, there are many wealthy people who do not understand or under estimate the

real value of luxury items but they pay just for the brand name or its one of the most

expensive items to demonstrate their prosperity to the other people in their society.

The value of an object is obtained and decided with its usage, exchange and work

value. The first one represents a product’s functionalities, the second one defines

luxury level according to its price level and the third one indicates the luxurious spirit

after highly qualified series of operations that cover the final item. Thus, it cannot be

ignored even one of these three values from luxuries whole. The similar explanation

has been stated by (Wang & Wallendorf, 2006), the total amount of money spent for a

luxury item is not a significant or an enough measure of the status level nowadays in

the luxury market where there are many discount implementations, end of year

reductions in price, purchase of previously used items or knock off branding. That’s

why the authors have rejected their hypothesis that has defended for the items that

signals high status, the higher the price of a product, the stronger the relationship

between materialism and product satisfaction. But it still remains to be explained the

effects of high status products that signal the owners’ status, on the relationship

between materialism and satisfaction.

At this point, it should be noted that, while we’re talking about luxury market,

customers’ expectations from luxury brands, we generally discourse with privately

consumer luxury, which concept is created by (Bourne, 1957). The author has

separated luxury consumption ways as privately and publicly. Privately consumed

luxury reflects an individual choice and signals the owner’s status. Because of the

nature of luxury, product influence should be strong. But, because of it’s not

distinguishable or has low visibility, in comparison with publicly consumed luxury,

brand influence should be weak. (Bearden & Etzel, 1982)

While we’re talking about high prices in luxury, it should be mentioned societal

structure and social stratification sets of luxury. For many consumers, luxury is

deliberately conspicuous, ostentatious and it is certainly not accessible for majority of

the society as it is not a necessary. It has a fundamental function of recreating this

social stratification but the way it is doing that in a democratic manner. ‘We need to

know our place in society.’ (Jarvis, 2009) For instance, women handbags show the


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cultural, professional and approximate income level of women; for instance, a Kelly

bag by Hermes reflects a loyal luxury customer’s substantial wealth because of this

woman’s choice and her affordability to buy this handbag. Luxury must be somehow

difficult to access by majority of the society, thus luxury is opposite to equality with

its major aspects. However at this point, we may face a dilemma between exclusivity

and accessibility while we’re going through our research question because of its

defense about affordable luxury. But, this kind of approaches that stratify the society

has gone off the boil and it should be accepted that the market has changed visibly.

Additionally, there may be some differences between Europe where has had a deep-

rooted luxury history and Far East where is extending its luxury market day by day.

When Chinese market is assessed, which cannot be ignored in luxury market any

more; we see the similar consequences with the idea above. KPMG has made a survey

among Chinese luxury customers in 2011 (KPMG, 2011) and has found that; 72 per

cent of respondents have expressed that they appreciate the luxury’s superiority not

just the pursuit of popular fashion brands, 62 per cent of them have expressed that

they have luxury items because of the aim of rewarding themselves. 60 per cent of

them have expressed that their success and social status may be demonstrated by

owning luxury items, 60 per cent of the respondents have expressed that they feel

confident when they have luxury. With these explanations, it can clearly be observed

a social stratification from luxury customers’ perception in Chinese market. This

survey’s result also shows us why luxury must be priced over than other consumer

goods in Chinese market because of the residents’ willingness to pay high amount of

money and the difference market needs sui generis marketing implementations in

luxury market.

To support the ideas that defend high prices in the market, we have a success story;

we see Louis Vuitton is at the top of luxury brands’ brand equities list even if the

brand does not give discounts and also increases prices continuously even in crisis

times. To sustain their long-run success, traditional luxury brands have to fulfill some

special requirements of their business. According to (Kapferer & Bastien, 2012), there

are two conditions that must be respected by brands to maintain the dream of luxury.

First one is the human hand has a significant role and must take a part in the

production process. The authors have stated that Rolex or Aston Martin’s products are

not handmade but they include at least some parts, which are created by human hand.

In order to maintain the handmade aspect, while guaranteeing a sufficient level of


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technical quality to avoid any major discrepancies, it must be rationalized manual

production. Productivity must be achieved through organization and not through

mechanization. To maintain the luxury dream and to sustain its exclusivity, the second

condition that must be applied is that production must not be outsourced and must not

be relocated. Outsourcing means losing control and familiarity with the production

process. It cuts the connection, which is fundamental to luxury, between the artisan,

or group of artisans, who produced or designed the luxury product and the client. The

creative team should not stay out side of the production process and consequently this

high cost of luxury must be covered with high prices as a requirement.

When we continue to assess this new luxury’s geographical structure globally, Flur

Roberts who is the head of luxury goods researches at Euromonitor that is the world’s

leading independent provider of strategic market research data, has explained (Wang

L. , 2013) that based on their predictions and the living proof of incrementally

growing population in the area, Asia pacific will interestingly be the major market in

the luxury world in the next five years, until 2018, and she has said that the main

effect behind this growth is China and also the other emerging markets in the area

such as Malaysia, Indonesia, India etc. According to their studies, India was the most

vigorous luxury market between 2008-2013 and further 86 per cent growth is

expected from India market until 2018, which is followed by China with 72 per cent

growth. Under the lights of these growth rates up to 170 per cent over the next five

years, it is expected that Asia Pacific region in 2018, is going to depose Western

Europe that has been the clear leader in luxury consumption by landslide for long

years. When Robert was assessing the situation in the South America, she has

explained that since 2012 Mexico has been the major luxury good market in the area

and is the world’s fifth largest emerging economy after the BRIC countries, which are

Brazil, Russia, India and China. According to their predictions, it is very hard to

extinguish Mexico’s strong position because of its rising economic confidence in

luxury good industry. Nowadays, luxury brands have completely different point of

view about Mexico than five years ago meanwhile they’re planning to open new

luxury stores.

(See Figure i)

Besides the essential luxury houses, there is a rising demand for affordable luxury

lines also in developing markets and this explains industry’s strategic focus on China.

Because of the extreme high retail prices for European luxury items in China as a


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deliberate strategy to coordinate closer to China where the import regulations increase

prices sharply, Chinese consumers generally make their luxury shopping in their

home country rather than on their foreign travels. In sum, emerging markets’ luxury

consumption is expected to grow by 80 per cent by the end of 2015 and if the

commodity prices rise, governments make easier to import luxury goods, it would be

even higher than these forecasts.

After analyzing the geographical situation, in the sight of our research question that

cares about discounts’ effects on consumers’ perception, it is necessary to understand

sub categories in the luxury market. New luxury targets the upper middle market, has

been positioned at lower prices or discounts, and includes three types of products

(Silverstein & Fiske, 2013): Accessible super-premium goods: These types of

products are generally priced almost at the top of the category, which they belong, but

in line with the affordability of middle-class consumers. Old luxury brand extensions:

These types of products are lower prices form of traditional luxury items that were

afforded by only wealth people. Masstige (merging mass with prestige). These types

of products are so called premium that lie between first class and mass-produced

product categories. But they are still substantially lower priced than the highest ones

in their category. This classification is one of the most proper one around the related

literature because of its collectivity with our research concern that discuss about

discount or lowered price luxury items for essential and for new luxury brands. The

missing point is the structure of this classification is too much focus on price levels

without considering other elements. (Fernie, Lawrie, & Hallsworth, 1997) have

observed that most of the companies in the luxury fashion market, manufacture and

sell diffusion lines in addition to their exclusive haute couture products which is

generally their core business. These are lower priced and available for high volumes

to reach more consumers and introduce them to a lifestyle linked with their brand

universe. Even though the authors have not sort subtitles, they have added the

statement about extended lines that are related with the core business. (Beverland,

2003) has divided entire market for type of products into four classes that is similar to

(Silverstein & Fiske, 2013)’s classification for new-luxury items: the mass or bulk

level, the premium level, the super-premium level, and the icon level, with increasing

exclusivity as a critical success factor. Insufficiently for our research-wide, (Catry,

2003) have separated the luxury market into exclusive goods and accessible lines.

According to the author, exclusive luxury goods trust on their rarity that may be


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arisen by several reasons such as natural shortages of some materials, manufacturing

capacity, artificially sustained rarity. But accessible luxury goods trust on rarity that

has been built by information, selective distribution, exclusive shopping atmosphere,

price, origin from culture, packaging etc. Dubois and Czellar (2002) have stated that

exclusivity and desirability have transformed from prestige brands that may be

defined with high quality and performance to luxury brands that may be defined with

high perceived comfort, beauty and refinement and this statement shows that so-called

new luxury combines prestige brands’ high quality and luxury’s beauty within the

mentioned product categories. (Silverstein & Fiske, 2013) have identified the new

luxury category as consumers nowadays are not only interested about luxury items’

itself, they more care about the image that are linked to the luxury brand. New luxury

brands do not refer to naturally rare and thus they’re not produced in low numbers.

These brands’ items gain the luxury cachet as long as they create an outstanding

design; provide additional services, a real experience, sophisticated store atmosphere

etc. Also, emergence of this new, accessible luxury brands’ products has been framed

because of consumers’ shopping habits that are related with their trade-up. (For

instance, a couple who travels to Monte Carlo for their holiday may prefer to fly with

EasyJet whilst they have set their booking at Hotel Hermitage.)

After the idea about the geographical situation in luxury market and its different

product classifications by different literatures, are narrated, presently, we go through

luxury customer types and their perspectives to assess their perceptions among the

different price policies in the luxury market in a direct relation with our research

question. Monroe (1973) has argued that a customer may consider reference price,

price ranges and the last purchasing experience when they buy a luxury item.

Similarly, (Zeithaml, 1988) supports that customers may consider that extrinsic cues,

such as brand name and advertising level, rather than only intrinsic cues which are

closely related to good’s physical attributes, also play crucial role in customers’ price

perception and buying behavior. This tells us the importance of choosing promotion

and pricing implementations in the luxury market. Also, the financial dimension of

luxury value addresses direct monetary aspects such as price, resale cost, discount,

and investment, and it indicates to the value of the product as stated in euros, as well

as to what is given up or sacrificed to obtain it. (Ahtola, 1984)

As a result of these external happenings on consumers’ perception, many authors have

proven that the high price of a good may have a positive impact on customers’


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perception that evokes high quality, which has been also supported by the previous

surveys’ results. (Erickson & Johansson, 1985) Status-conscious consumers are also

straight when they assess prestige level with the etiquette price. (Groth & McDaniel,

1993) Thus, prestige pricing—setting relatively higher prices to remind high quality

or status may make certain products or services more desirable. But, at the same time,

even though luxury is generally associated with high prices, it should not be ignored

that luxury does not always have to be expensive and also every expensive item

cannot be counted as luxury. Luxury consumers expect and demand more value

throughout the luxury but some items may be perceived as luxury because of its

sentimental value such as wedding ring as a family heirloom or as a personal

meaning. Also some items may be perceived as luxury because of its investment value

such as a painting or a classical car etc. Thus, customers may differentiate or compare

between actual price of the product and the perceived price. (Jacoby & Olson, 1977).

However, demonstrating high quality via high prices in accessible luxury market is

not that much easy to implement for luxury brand managers. As a common used

marketing strategy, an item that has a high quality is introduced at a high price and

then it is lowered overtime when the amount of informed customers increase. The

high price at the introduction level signals high quality because of the requirement of

high cost production process as most of the luxury brands’ companies have and

generally they would like to limit the amount of sales more than low cost companies.

In consequence of this reflection, consumers perceive these products as highly

qualified. In addition to this information, a low cost firm would lose sales volume

when they choose skimming price strategy because of informed customers’ rejection

to buy a product at a high price. It is not a threat for traditional luxury brands since the

information about the luxury item spreads among consumers and they get more

information about the brand, it becomes easier for them to signal their items high

quality. But it has been noted by (Bagwell & Riordan, 1991) these high prices in the

market declines over time; when the market gets mature. The authors’ essential

argument is defined nominately; when a firm launches a new product to the market

with some new innovative features while they’re not sure about its quality; some of

their customers may reveal the real quality of the product. But all of them are

informed that high quality products should have high prices because of its high

manufacturing costs. Thus, it may be said that the most effective way to be profitable

is entering the market with lower quality products at relatively higher prices because


Page 16: Thesis

of the perception of majority of consumers that is directly proportional with high

quality. This strategy has two advantages; first, the possible low volume at the end

can be compensated by high profits and the second, informed customers would give

up purchasing low quality products at high prices. In sum, when we consider

uninformed customers, it may be said that they derive high quality standards from

higher prices. But when the information about the product spreads among consumers,

the number of uninformed customers decreases and so, it becomes even more costly

for the company to signal high quality to the uninformed consumers. By the authors, it

is suggested to make small price distortions, to signal high quality effectively and

introductive high prices with declining prices over time strategy may signal high

quality in the traditional luxury. Because of the common information that consumers

have, signaling exaggeration decreases and it might be a risk for the new products that

a company launches and this linked weakness between price and quality may be

interpreted as measurement error made by management for accessible luxury brands.

However, to assess these different aspects of prices, (Wiedmann, Hennings, &

Siebels, 2009) it has been made an experiment and have been suggested by authors to

set value-based segmentation analysis in the luxury market according to their

customers’ personal values. Knowledge of all relevant aspects of consumer

perceptions of luxury and more robust measures of luxury value in different market

segments are, of course, keys to managerial practice. In managerial implementation,

information about the customers’ perception in luxury and measurement of their

luxury value in different market segments are the key assets. If it is certainly

understood why different consumer segments buy luxury items, which motivations

they’re driven by, a luxury brands would obtain more sales from their target

customers because of pinpoint selection of items and implementation right promotion

or pricing strategies towards to their attitudes. (Fromkin & Snyder, 1980)

In addition to these ideas, consumers’ value perceptions, their assessments and

motives are not only connected with social aspects that include displaying status,

success, distinction and human desire to impress other people. They are also linked

with luxury brands’ financial, functional and individual services. The authors

(Wiedmann, Hennings, & Siebels, 2009) have summarized it, as luxury value

comprises social and individual values and also functional and financial aspects. It is

significant to incorporate all related cognitive and emotional value elements in a

complex model. When the project is put into practice, many essential luxury brands


Page 17: Thesis

and also new ones that aim to serve accessible luxury to majority, move upmarket to

create aspirational appeal and down-market to make their items more accessible and

competitive to fulfill different individual, functional and financial aspects of

consumer that have discussed above. On the same direction with this idea, (Silverstein

& Fiske, 2013) have examined brand extension implications that might give ideas to

luxury managers regarding to discount possibilities in the luxury market without

creating negative perceptions on their minds. New luxury brands have different

appeals than ever before that move upmarket to offer aspirational creations and move

down-market to offer affordable items. When the range of prices between items have

been compared, it has been shown that there is almost three or four times price

difference between traditional luxury brands’ highest and lowest products while there

was almost ten times difference between the product categories. The authors have

given an example about Mercedes that has very different products such as C230 at

$26,000 and Maybach 62 at $350,000. But they benefit and share the same brand

name with advanced engineering, quality manufacturing, excellent performance,

solidity, safety and luxurious comfort. Furthermore, both of them have a distinctive

Mercedes look and sign. As another example to satisfy and charm consumers’

expectations, the authors have stated one of the most successful new-luxury wine

brand is Kendall-Jackson. It is a good example when it is explained the methods to

build discounted, accessible and more affordable luxury brands. Kendall-Jackson was

selected the number one brand of table wine in the US with more than $600 million

retail sales. Kendall-Jackson Wine Estates has won more awards than every

Californian vinery houses in last ten years. According to the history told by the

authors, it was founded by an industry outsider, Jess Jackson. He was responsible for

closing the gap between super premium and jug wine. Jackson has told that there was

no qualified and tasty wine that middle-class people can afford it. Here at, he has

started first with defining the complex, subtle and unique taste of the wine and

characteristics of it. He had emphasized on the technical aspects of wine production at

the beginning thus it has allowed him to make outsourcing such as negotiating with

buying agreement with vineyards, hiring skilled wine makers which might be risky

for a luxury brand. He also has focused on the art and science of the admixture. So, he

was able to produce the premium wine to large groups of people with little variation.

He has set the price at $5 for a bottle; it was below the $10 of the boutique wines and

above the $2 of economy wines.


Page 18: Thesis

Kendall-Jackson and Mercedes’ C Series are quite related examples in the sight of

accessible luxury brands that have created excitement among its consumers legally

and even it has expanded Kendall-Jackson wines through Chile and Australia. It still

continues to innovate with the idea competitors can catch their success as Mercedes

has the similar story with its sub lines.

However, in opposition to cheapen the product ranges in the matter of direct

relationship between our research question and pricing implementations, (Kapferer &

Bastien, 2012) have stated that luxury items are different about pricing than upper

premium or fashion items and should not be explained together, which should be

defendable by their utility curve, functionality and technology. Luxury does not have

to sell technologically impeccable items as engineering marvel. Because its nature

mainly based on unique design, creative art, something makes the owner exclusive

and sacred. Luxury brands, that produce high function and high technology items,

would gain competitive advantage as a big plus as Porsche, Aston Martin has done

already. As we have stated before, luxury has some certain rules that marketers have

to respect them carefully, to build strong luxury brands in the long run. Dissimilarly

from traditional consumer marketing, marketers should forget about positioning in

luxury; because of its special nature that is always superlative and someone cannot

compare a luxury brand with its competitors. Luxury is the representation of a taste,

of a creative identity, of the intrinsic passion of a creator.

At this point, it should be examined why people buy luxury items and why they spend

billions of dollars to these brands all around the world. As a source of rising real

income levels, now, people buy luxury items more than ever before and (Burnkrant &

Cousineau, 1975) have demonstrated that people use others’ product evaluations as a

source of information about products. If a person sees a luxury item on another

person’s hand, naturally, he may have a desire to own the item to see himself at the

same status level or financial position with that person.

In luxury market, majority of the consumers would pay higher prices for a

functionally similar goods because of these customers’ high desirousness to obtain

high status and their belief that contain high status is brought by such items that

shows their wealth. (Bagwell & Bernheim, 1996) As we have stated in the definition

of luxury, luxury carries high status and prestige for many people and owning a

luxury item reflects an owner’s high status. In some ways, higher prices make many


Page 19: Thesis

luxury consumers feel superior as minority of the society can afford to buy these

items. (Garfein, 1989)

Differently from consumers’ degree of wealth and need for status that has been

assessed above by (Han, Nunes, & Dréze, 2010), marketers should consider about

consumers’ social needs. Prior research has identified the existence of two competing

social needs among consumers: a need for uniqueness and a countervailing need for

conformity (Fromkin & Snyder, 1980). When consumers purchase products to satisfy

their need for uniqueness, the value of the product increases as its perceived

uniqueness increases. (Nagel & Holden, 2002) In other words, consumers could value

a product less when more consumers own it and they’re ready to pay higher prices

when perceived uniqueness increases. There is an evidence of such behavior even in

the case of products such as cookies. (Worchel, Lee, & Adewole, 1975). Prior

research has suggested that the need for uniqueness is an individual-level trait. (Tian,

Bearden, & Hunter, 2001) Many luxury consumers would prefer to buy such a

different product because of their willingness to feel exclusive and satisfy themselves

not because of their desire to show off their items to other people or to make them

jealous. Another social need that affects the purchase of conspicuous items is some

consumers’ desire to application for adhesion that can be explained by conformist

people’s attitude that follow majority of the society without needing to be more

different than them. Some luxury consumers value a luxury item if more and more

people use this item because of their willingness to be look-alike with them. But the

need for conformism has also been identified as an individual trait. This might be

summarized like that; snob people who have a desire to own unique items and who

are ready to pay higher prices, buy luxury goods if they perceive it as unique because

of their thought that reflects if the price increases, the demand of that product would

decrease and less people can afford to pay for it. This expectation would be rational if

the conformist people have a downward sloping demand curve. Contrastingly, if the

price of a luxury item decreases, more people would buy it thus snob people would

prefer to stay far away from that product because of the low perceived uniqueness. As

managerial point of view, because of the increased amount of snob people, luxury

brands are less inclined to lower the prices in the market. However, (Robert, Caruana,

Medway, & Murphy, 2013) have underlined the negative discourses on luxury

consumption such as materialistic, hegemonic, commoditized and; problematic types

of consumers such as conformist, conspicuous, followers and they are bundled


Page 20: Thesis

together around a constructed “luxury brand market”, from which respondents release

themselves as liberators and contrastingly as anti-brand discourses (Holt, 2002).

However, the authors’ indication that expresses problematic types of consumers such

as conformist, conspicuous, followers is quite narrow and dangerous statement

because of the contemporary structure of the luxury market and its living financial

proof. When they are targeted properly by luxury brands, conformist conspicuous

consumers can be benefited thoroughly in the terms of discounts, accessible luxury

and entry-level items, accessories, fragrances etc. while obtaining successful financial

results in luxury market.

According to these types of consumers, the morality of spending concept clarifies two

interdependent processes according to consumers’ point of view about their morally

focused consumption. This is provided via building self-disciplining, balancing

practices and the problemisation of moral characters by the four authors. The authors

have illustrated that one consumer has stated that she tries to be careful and sensitive

on her shopping; if she spends £300 and needs something more, she does not prefer to

go to high street because of her self-discipline and willingness to balance her expense.

The passage serves a double purpose of signaling awareness of socially punishable

norms of excessive, “over the top” consumption, while at the same time putting her

identity to forefront within a more careful, self-disciplined approach to luxury and the

author has expressed that self-disciplining practices are part of a broader process of

problematizing moral character. Another consumer has stated that she would not buy

a product from Gucci because of her attitude that does not care about nametags on the

items. She buys whatever she likes, a brand name does not make any difference for

her. This metonymically invokes a negative anti-brand discourse that challenges the

materiality, superficiality, meaningless and commoditized nature of “commercial”

brands and the moral character of those who use them. Drawing on this, these

passages implicitly contrast subjects who are concerned for how someone is – as a

morally autonomous person – with subjects concerned about how they appear to be

with the brand tag. This modifies the concept of moral character as contingent upon

the old subject. It is noted how this passage connects to the earlier theme of having vs.

being, where the second consumer supposes that she “wouldn’t just have anything”.

In contrast to the majority of luxury consumers’ attitude, the second consumer only

buys what she judges as worthy, regardless of any perceived aesthetic validity

parceled in luxury brands. Luxury has been and probably is going to be in the focus


Page 21: Thesis

center when it comes to moral criticism because of its special feature that evokes

spent considerable amounts of money beyond a product’s functional value and

without considering the other people’s challenging conditions of life. Especially in the

duration of economic crisis such as it has happened in 2008, the word of ‘shame’ has

often been remembered in Western capitals. Unscientific resources have indicated that

luxury consumers have requested expressionless, black bags after they have made

their shopping in the luxury stores to avoid to be understood as unconscious and

disregardful while they’re walking at the streets with the fear of other people’s moral

judgment. When it comes to rational world that everything’s values are measured with

its functional utility, luxury market would not find a place for itself in the market but

this discourse would also stay out of the people’s social life. Luxury is fuelled under

the light of social life which includes living together, comparing oneself to other

people, living in a competition and these matters are already at the center of our

capitalist system and that’s why conspicuous consumption has been integrated into

the luxury behavior naturally. Nonetheless, some groups of people need to use or own

it more than others because of their different requirement for this social competition

and try to differentiate themselves until they expand it to the level they wish to be. –

Far away from the majority- (Bourdieu, 1979) Elite groups who have extremely high

wealth may even ask for very unobtrusive, ingenious and sophisticated forms of

‘brand recognition’, only recognizable to a few over conscious customers (the

ultimate sign of one ‘s superiority). (Kapferer J. N., 2010)

However, some exceptions can be observed unexpectedly with regard to consumers’

position in their society. (Rucker & Galinsky, 2009) have made some experiments to

examine how power affects consumers’ spending properties, which answer our

sensation about people’s preferences, expectations and perceptions to buy luxury

items with different pricing policies. The findings are quite related with the concept of

luxury: Authors have found an enormous desire to acquire for products with high-

level associations of status but no differences for products with low-level associations

of status. When they set the experiment, they have not mentioned the price. Status has

meant only privilege and special items, which can be found rarely. According to their

findings, when only a product was exposed as unique and scarce, it has increased low-

power consumers’ willingness to pay because of its reflection of high status.

Nowadays, it should be accepted that powerless people who have limited budget and

demonstrate their place in their society, might accept also higher prices in luxury if


Page 22: Thesis

their aim is to show high status to their society. (Rucker & Galinsky, 2009) have

proven that individuals with lower power or low status in their environment are more

inclined to buy luxury goods that are high in status class and conspicuously consumed

by others. These studies have shown that people who buy regularly luxury items or

prefer to use luxury services believe that feasible or affordable alternatives cannot

provide a certain level of social status to them and their perceptions may eliminate

these so-called consumer goods. That’s why they are prone to buy regularly luxury

items. According to the authors’ previous work (Rucker & Galinsky, 2008), three

results have been created to make ‘power’ issue clearer. First, it has been explained

that low power is a situation that is occurred in people’s psychological state aversely

and consumers who perceive themselves as low power, try to find a way to cover it up

and lastly decrease this negative feeling with conspicuous consumption. Status has

been assessed as a formation that signals power. Once it has been obtained, people

would restore their power on their perception. Third, purchased products have a

meaning that signals somebody’s status. When these three flows are taken into

consideration, the authors have hypothesized that a consumer who buys status-related

items, he aims to restore his sense of low power. Therefore, a person who perceive

himself as low power, would have desire to acquire items that spontaneously signals

its status to the society such as diamonds, executive pens etc. Ultimately, the authors’

results have lighted that high-status products that can be explained as unique,

sophisticated and scarce have increased low-power participants’ desire to acquire but

low-status products have not made any changings on their purchasing attitudes. Also,

higher prices are generally perceived as higher quality in consumer market, which

includes our luxury world. Another reason to purchase luxury items for customers is

that through acquisition, materialistic consumers attempt to fulfill higher order needs

such as desire for prestige, self-assertiveness, preeminence, and dominion. (Richins

M. L., 1991) On the same direction, for many marketers, when they want to add snob

appeal to an unexcited or ordinary product, the first thing that comes to their mind

would be increasing its price. (Eastman, Goldsmith, & Flynn, 1999) In relation with

this approach, they have seen that there are many customer types who do not want to

see their products on the other people’s hands and want to feel exclusive with their

products’ uniqueness and inaccessibility.

On the other hand, these approaches that mainly defend high prices in the luxury

market, may sometimes not cut the eyes according to people’s economic situation.


Page 23: Thesis

This situation that defends low-power people’s tendency to demonstrate their high

status with luxury goods may direct them to counterfeit goods, which was not

considered within the related literature. When we examine literatures about luxury

market and its discount effect on consumers’ perception, it would be mentioned also

counterfeit goods. Functions that are defined according to consumers’ consumption

attitudes towards luxury goods are consumer, production category and marketing mix.

The authors (Wilcox, Kim, & Sen, 2009) have classified consumers according to their

attitudes regarding these people’s counterfeit consumption habits or related views on

it. Social-adjusted motives: These consumers are not much prone to buy counterfeit

goods after they watch image-based advertisements that illustrate the damage of

counterfeit consumption’s on people’s social standing. These damages may be losing

a close friend’s thoughts because of unethical purchase, being unwanted or rejected

one from a significant reference community. Value-expressive motives: These

consumers are not so much prone to buy counterfeit goods after they watch

information-based advertisements that illustrate ethical issues linked with counterfeit

goods. These ethical issues may be narcotics, terrorism, and exploiting child labor etc.

These two types of advertisements that have explained above can be implemented

while considering people’s different motive types of consumers. For instance, the

authors have exemplified fashion media channels as image-oriented and news media

channels as information-oriented and they have stated that different marketing

campaigns should be exploited when there are different motives.

(See Figure iv)

Furthermore, counterfeit market may also damage the concept of luxury on loyal

consumers’ perceptions. (Commuri, 2009) has divided customers into three categories

according to their point of views about counterfeit items of luxury which should be

analyzed by luxury brand managers carefully. These three categories are flight,

reclamation and abranding; Flight means customers who immediately notice if a

product is original or fake because of their loyalty to the luxury brands and if a

brand’s counterfeit items are widespread; they diverge from the original brand.

Reclamation means customers who are generally older and wealth and do not care

about the extent counterfeit items’ availability in luxury. Abranding means customers

who think themselves superior than counterfeit buyers and defend that these

counterfeit buyers cannot recognize their preferred brands because of their choice of

silent goods that have smaller logos on the product.’ The author has exemplified these


Page 24: Thesis

consumers, as Prada customers would not show off their Prada items because of their

standard of judgment that assumes there is no necessary to demonstrate themselves to

other people. There must be some mystery in luxury, nametags should not scream


When managerial implications are considered to fight with counterfeit issue,

managers have focused on the rate of lost sales because of some consumers’ choice to

buy these items rather than original brand. But the current research has shown that

this focus underestimates the financial results of loosing loyal customers’ loyalty

while they’re over looking the sales. They should consider the loss of equity because

of genuine-item consumers’ abandon the brand.

Counterfeits do not only devalue the brand also they destroy the brand-based essence

and the relationship between the luxury brand and its most loyal customers that spend

and invest much times and money to the brand. The findings of the research have

emphasized that luxury brands should focus on customer equity before they struggle

for other situations. When we examine the discount effect on consumer perception, it

cannot be ignored that for many people the counterfeit of luxury brands as substitutes

of luxury items. Many marketers meet in the middle of the idea that if nonexistence of

any counterfeit of a brand or existence of many counterfeit of a brand are the similar

weaknesses for luxury brands. It can be interpreted as if the brand awareness is

extremely low and therefore if there is no desire to your luxury items, it would not be

produced any counterfeits of your brand. That means that you are not attention on

luxury customers’ purchasing decisions. But oppositely, if the brand awareness is

high and therefore if there is huge desire to your luxury items, it would be produced

maybe thousands of counterfeit products of your brands in all around the world. These

two issues must be examined carefully by marketers to not give passage to counterfeit

market and they should consider what to offer these consumers to canalize them to

buy from luxury stores.

As another purchasing habit, whereas newly acquired luxury items may enhance

product satisfaction temporarily, the gratitude that is obtained after shopping may

decrease when time passes and that satisfaction then may return to a lower level.

(Richins & Rudmin, 1994) It means that consumers in luxury market tend to buy

regularly to ensure their temporary satisfaction and luxury marketers should consider

this in their decision making process. (Amaldoss & Jain, Pricing of conspicuous

goods: A competitive analysis of social effects, 2005) The authors in the related


Page 25: Thesis

article have answered two questions to explain the relationship between pricing and

luxury goods which is quite related with our research question which is ’Does

discount create negative effects in consumer’s perception in luxury market?’ First,

what is the effect of consumer desire for uniqueness or conformity on the demand

pattern for conspicuous goods? Under the light of this question, they have shown that

in a market that consists of snobs and conformists, demand among snobs would

increase as the price of a product increases. (Corneo & Jeanne, 1997) However, the

demand among conformists, as well as the total market demand, would decrease as

price rises in the same direction with traditional demand economy. They have noted

that their results do not rely on signaling either product quality or wealth of

consumers. Consistent with the authors findings, (Chao & Schor, 1998) have reported

that the demand for women’s cosmetics increases as their price increases in a sub

segment of the market, though the overall demand curve has a downward slope.

Moving beyond this correlational support, in the laboratory study, they have found

that more snobs buy a product as its price increases. Thus, their findings have offered

a potential explanation for the upward-sloping demand curve in marketing textbooks

(Berkowitz, Kerin, & Harley, 2000). Second, how does consumer desire for

uniqueness or conformity affect firm’s prices and profits? In a duopoly market, the

desire for uniqueness leads to higher prices and profits as it was mentioned above and

the prediction for this question is like that; As the price of a product falls, it naturally

attracts more customers and thus makes the product less charming to the customer

who have snob appealing. In contrast, streams of thought of conformist people and

thus their purchasing habits encourage price competition and thus reduce firm profits.

These different customer types can be used by marketers, to set brand’s pricing and

promotion strategy and also to give different creative ideas to brands’ artists and

designers, which decide conspicuous level of products. Also, this source opens the

doors to the accessible, new-luxury brands’ items with affordable or discounted price

to be able to target conformist consumers in the market.

The luxury market, henceforward, may be interpreted as takes place relatively in mass

market that does not only include the wealthiest people of the society. It has many

more members from other classes than ever before. As it has been suggested by

(Silverstein & Fiske, 2013), although affordable, new luxury brands still enjoy a

reasonable level of perceived prestige, which differentiate themselves from middle-

range products. Also, these luxury items are sold at price levels, which cannot be so


Page 26: Thesis

much imperceptible or separable than middle-range products to attract more people’s

attention when it is compared to niche of traditional luxury brands. This strategy has

been best described as a ‘masstige strategy’ by the authors. A masstige –mass &

prestige- positioning strategy is viewed by the authors as being very innovative and

effective because of the combination of successful prestige positioning strategy with

extensive application without damaging consumers’ perception on the luxury market

and without blunting their high status expectations as an answer to our research

question. Such a strategy has made some of the new luxury brand owners the largest

firms in their industry in terms of revenues. The authors (Turong, McColl, &

Kitchen, 2009) have provided an empirical evidence of masstige positioning

strategies’ successes of new luxury brands. They have noted that luxury brands are

generally assessed with exclusiveness and expensiveness. Thus, their high prestigious

brand image and respected status can only be sustained with providing limited

accessibility in both geographical and demographical phrases. The authors empirical

work has shown that the line between traditional luxury brands and the others have

blurred over time and the authors have proven that a certain level of prestige can be

sustained even when a mass marketing strategy is applied to the luxury brands as long

as they respect the requirements of luxury strategy. Also the concept of luxury is

clearly flowing by the time passes and under the effect of cultural changings. In the

past, luxury was associated with champagne, caviar, designer clothes and sports cars.

Nowadays, with increased prosperity, luxury is a blurred genre, which is no longer the

preserve or under the private space of only the most elite people. Also progressively,

more consumers have traded up which has a meaning of selling something in order to

buy more expensive item, and thus nobleness and aristocracy for the luxury has lost

its previous significance. Nowadays, new generations appreciate materialist comfort

when we compare with their ancestry. It shows the existence of cultural shift in

personal fulfillment and passion over experience. Accordingly, it might be said that

luxury is nowadays about an experience and authenticity comparatively to monetary

values. It does not mean that luxury is just a tool to gain status in the society; it is just

a larger concept that cannot be explained just under the fiscal translations. Because of

people’s willingness to live in better conditions such as desire for travelling the world,

eating in a good restaurants etc., their focus has shifted through aspiration and

experience that may be explained with personal transformation. Here are some

examples that has given by authors from some of the popular and kind of accessible


Page 27: Thesis

luxury brands; authenticity to RF Hotels, sexuality to Victoria’s Secret, design and

nostalgia to The Mini, health and well-being to the mineral water sommelier Ritz

Carlton Hotel. This is what Danziger (2005), Israel (2003) and Gambler (1997) have

identified as the ‘feminization of luxury’, where luxury has moved from its male

souvenir and status symbols towards experience and authenticity. It might be a reason

that women’s income level and their purchasing power in the society have

substantially increased which has a direct affect on luxury fashion, tourism etc.

industries. In addition, the authors have mentioned that the definition of luxury is

getting more difficult to put into a character as the time passes. In today’s world,

luxury is not certainly a necessity, but, nor extremely inaccessible or unaffordable as

it was before. But it should be noted that even if luxury goes into the mass market, it

should keep certain level of personal service, authenticity and experience. Also, the

traditional luxury, in other discourses essential, elitist, difficult to afford luxury is still

valid in the market while holding their successful position. That’s why we do not

suggest adopting one solid pricing or marketing strategy to new luxury brands in the

sight of our research question.

However, (Barnier, Falcy, & Valette-Florence, 2012) have defined six criteria that

should be respected by all luxury brands and these criteria are disaccord with the new

type of luxury; Luxury should be seen as a very qualitative hedonistic experience or

timeless item, offered at higher prices than its substitutes and its functional value, be

attached to a heritage, very unique know-how and cultural background, be partly

inaccessible that is provided by exclusive distribution, be present with customized

services and be in a position as a social marker that makes its owner special and

privileged. In order to give an example to these six criteria, it may be said that

DeBeers, a diamond company, had one of the most creative slogan in their one full-

page newspaper ad: ’a diamond is forever. Here today, here tomorrow’. This ad has

declared that luxury is timeless, valuable at any time. Nonetheless, it can be,

unfortunately, interpreted that, the authors’ suggestions extend along the traditional

luxury strategy and eliminate the existing demand and success of accessible and

affordable luxury. It is all about providing an experience to the customers. (Tynan,

McKechnie, & Chhuon, 2010) Customers do not define themselves by what they own

or what they buy because of their certain affordability to buy these items. Customers

are very interested in who the other customers are. Thanks to their competitiveness,


Page 28: Thesis

they want to meet with other customers via private events that are prepared by

essential luxury brands.

Even though we assess mainly luxury fashion retail brands in this research, it is useful

to mention briefly luxury hotel and airline industry’s pricing policies in the sight of

their discounts’ effects on consumer perception. In a recent study (Taylor & Kimes,

2010), it’s determined that consumers’ perceptions were influenced mostly by

familiarity with the different pricing policy according to its degree of fairness.

Nowadays, customers are more familiar with companies’ different revenue

management practices. To measure their ideas about customized pricing strategies,

which are quite common implementation in luxury market, in a recent study,

respondents’ perceived fairness was measured with considering the provision of

information and trip type. In consideration of familiarity is the key issue linked with

consumers’ perceived fairness and it has been suggested to luxury managers to focus

on improving different ways to increase customer familiarity with their special pricing

practices. Under the light of this statement, it is continued with three suggestions;

first, companies that are in luxury hotel and airline industries, should provide detailed

information about the different rates and conditions that linked to the rates on their

websites, 3rd party websites and also in reservation office such as sales agents.

Second, companies should ensure that they have provided special conditions when

they go through a promotion or campaign. For instance, it should be mentioned and

clearly stated that if a promotion is valid only for a brief period and consumers may

lock the special fares before the deadline. Third, reservation agents and front desk

sales clerks should provide systematic and detailed information about the different

possible rates and conditions to the consumers without any doubts. When they

provide concrete information about their policies publicly, managers would be sure

and guarantee that they have helped consumers to perceive them as fair that

consecutively will significantly and positively affect customer return purpose.

However, although they ensure the brand’s fairness with discounted offers, it can be

seen that marketing textbooks warn luxury marketers to keep their brands’ prices over

a certain range because of the reason that supports it would sell less at lower prices.

(Berkowitz, Kerin, & Harley, 2000) When we turn back to our main topic in this

section that assess higher prices in the luxury market, many of the authors have

declared repeatedly that low prices damage exclusivity of luxury brands with being

over accessible. According to this perception, it may be seen clearly that discount


Page 29: Thesis

effects or price alterations in regarding to make them over accessible would create

negative perceptions on some consumer minds in response to our research question.

When we turn back to the (Kapferer & Bastien, 2012) Luxury Strategy book that

discusses also different price strategies in luxury, it has been seen the importance of

accessibility issue in market; ‘‘the myth is fueled by luxury’s inaccessibility. This is

linked to the above-normal price of the models that expands the distance from

ordinary standards or products; even those are a part of the top-of-the-range. From

this point of view, the price of luxury is not a continuum with that of the upper

premium category. It is elsewhere; it measures a scope above quality and confesses

the excess of money in a consequence of owners’ passion or dream.

When the authors has mentioned to luxury cars, they have mentioned the pricing issue

and emphasized that they cannot be seen as only very expensive cars, they should be

seen something more than their monetary values. According to him, the brand legend

also is an indicator of luxury owners’ wealth. Apart from their wealth, luxury should

represent their glory, their symbolic power, their passion and their ability to discount

everything in consequent of their choice of this luxury. Also, it can be imagined by

many, luxury must give some honorific privilege to owners and beyond this privilege,

luxury should emphasize owners’ choices’ symbolic superiority and exclusiveness. As

it has been stated before, luxury should provide some personalized services to its

customers. The authors have continued with the luxury car industry and have given

some examples such as these owners have unlimited access to a mechanic who have

worked on their personalized car’s manufacturing process, they have valets who only

has parked the luxury car and they have a special phone line that is used for

emergency cases etc. These examples have shown luxury market’s high costs to

provide a certain level of quality standards and consequently have shown the reasons

behind the over-expensive price tags. To sustain a business, these applications’ costs

must be covered by the price of selling items. Thus, it can be understood easily the

reason behind extremely high prices. According to the authors’ anti-laws of

marketing, ‘make luxury difficult to buy’ is one of the most important statement that

explain there should be some obstacles before consumers get the item and stays far

away than our research question that interrogates discount strategies’ effect on

consumers’ perception. These restrictions have listed as financial, logistical and time.

Financial restrictions have indicated to the high price levels of luxury items, logistic

restrictions have indicated the importance of providing exclusive distribution channels


Page 30: Thesis

and time restrictions have indicated to create a period that takes time for customers to

own very special products that are hold on waiting lists by luxury companies

sometimes for several months. If luxury would be easily accessible as traditional

marketing’s requirements, the greater desire that is always tried to provide in luxury

market would be damaged and suffered.

However, the disinflation of travel supply and the continued downward pressure on

prices has served to ‘democratize’ travel, and in some senses this has democratized

‘luxury’ in other industries as well. Previously exclusive destinations and products,

from cruises to resorts, have become more widely available, and the exclusivity of

these types of travelling has become more widespread than ever before. (Twitchell,

2001) It should not been forgotten that these affordable products or services have

provided emotional engagement with customers who have used or owned them such

as Mercedes C Series that is perceived more affordable for majority of the society

while providing high-quality performance to consumers. Luxury managers should not

brush the new happenings off from their point of views because of consumers’


Even if we often have mentioned the notion of prices in this research, it has to be

something ‘not to be mentioned’ in luxury stores, display windows, ads, webpages

etc. In real life, we can observe this from top class restaurants’ menus, which do not

include meal prices on their menu. According to the author, the imagined price should

be higher than it really is. It is again at the opposite side to traditional marketing

strategies. As Renault did in its past, they have announced their cars lower price but in

fact, you have to pay more for additional details. When an imagined price is higher

than actual price, it creates value both for a luxury brand and for a customer who

owns or uses it and high price is only one element that evokes luxury strategy. After

this information, the author has given an example about Rolly-Royce, which sells

extremely expensive cars and has very niche client base, is not a profitable company

at all. Above a net profit rate of 35% on sales, such as Louis Vuitton and Hermes, they

have concentrated on a product niche and they have not given off their core trade.

Fashion can be applied only if your brand’s item is related to it such as Chanel has a

chance directly to do that. The most importantly, companies have to be sure if they’re

remaining in the boundary of luxury or not, in every dimension of their brands.

However, “affordable luxury” brands, like Michael Kors and Coach have also reached

huge success in both established and emerging markets, according to the current


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report. (Wang L. , 2013) Roberts who is the head of luxury goods researches at

Euromonitor, has claimed that Prada, Louis Vuitton and many other European fashion

luxury brands inflate their prices and arrive a point where many people cannot reach

or afford while new type of luxury brands that are offering affordable prices and

accessible items all around the world.

Dogmatically to these ideas that tolerate about new accessible type of luxury and its

appropriate strategies, (Kapferer & Bastien, 2012) have emphasized that these brands

cannot leverage their brands’ status because of not having some and correspondingly

their items’ prices should be bolder. Without reaching the sky-high prices of Richard

Mille’s first watch (RM-01 at €250 000), to signify luxury, one has to ‘create the gap’.

If a brand wants to lower the prices to reach more customers without damaging the

brand’s prestige and exclusivity and without negatively affecting the loyal customers’

preferences to the brand, the expansion of the product offering would have been taken

two major forms according to the author. The first is line extension in line with the

core business of the brand. When high-end luxury brand has been obtained in a first

line as we call core business, second, third and even more lines can be provided with

lower priced items under the purpose of attracting more consumers. Real life

examples are Dolce & Gabbana has introduced D&G and Armani has launched

Emporio Armani, Armani Jeans and Armani Exchange. The same has held for BMW

with its series 1.

The second form of expansion is performed through brand extension that is a market

out of the brand’s core business. This extension allows consumer to enter the brand

universe through new doors that are relatively more accessible and affordable than the

brand’s core business. The author has given examples about Armani fragrances, eye

wear, skin care, watches and leather goods, as well as flowers, chocolates, restaurants,

mobile phones, hotels and furniture; Ferrari sportswear and casual wear ranges,

fragrances, leather accessories, computers and a theme park in Abu Dhabi. Even

though the authors defend the high prices, there are two ways to lower the prices of

luxury items. First, they have stated that by lowering price personally / individually,

you would not devalue the product, but would give greater value to the client, since

you enable the person to make a good negotiation. It seduces insightful clients who

are blasé or who feel guilty because they already own many of the brand’s products.

They will buy yet another product, on the excuse that it is a good negotiation. The key

point is that it is a brand they’ve liked and they’re going to like because of its taste


Page 32: Thesis

and this application makes them love brand more than ever before because of the

feeling like they’re gifted by the brand as a result of their loyalty.

Second, they have stated that price reductions can be implemented to particular clients

on the purpose of make them discover the brand universe. In order to avoid some

misunderstandings, the reason behind this reduction must be clearly perceived as

legitimate such as a special offer for a consumer’s newlyweds or first baby.

By supporting Kapferer’s decisive views about luxury, (Amaldoss & Jain,

Conspicuous consumption and sophisticated thinking, 2005) have also refused to

cheapen the luxury. Because of people’s growing spending power, essential luxury

brands have increased their items’ prices disproportionally to sustain their distinction

and exclusivity. As it has been stated by previous authors above, the catch-phrase of

luxury is ‘when the prices increase, more snobs buy’. In opposite direction with our

research question, the authors have defended that it would be purposeless to cut prices

because of the injudiciousness of market share apprehension in luxury market. They

have defended that when a luxury brand expands its market share substantially, it

would lose the brand exclusivity in the same ratio.

However this rigid rule dwindles its historical glory because of the occurrence of new

customer expectations and directly proportional financial reports that explains the

success of new luxury brands. When we look at the new luxury fashion brands and

their successful strategies (Wendlandt & Goh, 2014); although Gucci and Louis

Vuitton try to sustain their glory and blame more affordable luxury brands for down

turning the sales in the market; they certainly lose power to newer, accessible luxury

brands. Customers in emerging markets for instance, which are the growth

mechanism of the luxury market, were formerly, prone to pay 625 EUR for a Louis

Vuitton canvas bag but now also they have a desire to buy for new luxury brands such

as Michael Kors is a NY based brand that offers affordable luxury and a taste of high

class with far cheaper prices that traditional luxury brands, that costs far less and

comprises good design and different tastes.

As a new type of luxury’s customer, Saltanat Shamova has indicated that Louis

Vuitton and its equivalents are expensive and their logos go through the floor. But

Michael Kors is best for her because of its simpler design and also its affordable

prices. One of the most important successes of Michael Kors is that it almost

duplicates the style of essential luxury brands such as Louis Vuitton’s Speedy Bag,

Chanel’s quilted leather tote on the crest of a wave. As an example; Kors' $300


Page 33: Thesis

Weston shoulder bag has the same fringed pompom and shape as Gucci's $2,650

Jackie shoulder bag with a substantial price difference.

(See Figure ix & Figure x)

When the authors have considered other fast-growing accessible fashion luxury

brands include Kate Spade that is based on US and Tory Burch that shines out with its

logo, Furla which has minimalist and humble design, based on Italy and France's

classic Longchamp handbag maker, they have stated that it is a main issue for the

parents of LVMH that holds Louis Vuitton and Moet Hennessey and Kering that holds

Alexander McQueen, Balenciaga, Brioni, and Gucci, which have built their

supremacy on their major two luxury brands and nowadays, they still comprise the

total volume of the profit and market share.

"They milked the cow so much that now there is no more milk," the CEO of a major

privately owned French luxury brand has explained to Reuters at Fashion week.

LVMH owns also Dior and Celine proverbially and has invested in more accessible

luxury brands such as Marc by Marc Jacobs which is the cheaper line of Marc

Jacobs, which makes up to 70 percent the brand’s total revenue. But the brand's

estimated sales, likely $1 billion, have dropped behind Louis Vuitton likely more than

7.5 billion euros and LVMH is contend to lose some of its growth when the brand

launches Marc Jacobs. In the sight of our research question, it cannot be said that it is

a failure of Marc Jacobs because of over-extreme prices of Louis Vuitton items, they

may make high profits at the end of current year but no one can claim whether it is the

right strategy or it is going to be sustained for many years.

In recent times, Gucci and Louis Vuitton have tried to consolidate its luxury strategy

while they have been reducing the amount of entry-level products, strengthening the

brand’s offer of expensive items, limiting shop openings in regarding to protect their

high exclusivity. Kering’s (is the French luxury goods holding company owner of

Alexander McQueen, Balenciaga, Brioni, Gucci) CEO Francois-Henri Pinault has

interpreted that it was a strategic decision to ensure the long run desirability of their

brands. Both of these brands have indicated that their upmarket explains the reason

behind huge fall down of their annual sales growth rates. But the main problem was

all about with the brands’ demands and existence of more and more accessible luxury

brands consecutively. Many analysts have stated that Gucci and Louis Vuitton have

reduced the amount of entry-level products from their product line but still they serve

as more than half of the revenue with their special luxury strategy. So, at this point,


Page 34: Thesis

the question rises: ‘Can these brands that have high-end business, sustain their success

and increase revenue in their long-run?’

Makiko Zuercher-Hosaka who manages the 12 million euro Dynapartners Luxury

Brands fund, has supported the same argument that the entry level items of Gucci and

Louis Vuitton face huge competition from new, more aspirational brands such as

Michael Kors and Tory Burch and this trend is likely to continue in the future.

However, (Kapferer, Klipperta, & Leprouxa, 2014) have expressed that luxury brands

have tolerance on pricing, on the other hand. Price alone is used to qualify as luxury

only when the brand is not known by majority of the society. If luxury brands desire

to engage with new consumers, luxury brands can create entry line products as long as

they respect some conditions. The prices of these entry lines must reproduce the

positioning of the brand vis-à-vis competitors’ own entry lines. Chanel fragrances

should be priced above Armani or Dior fragrances, for instance, according to the

product category to which it belongs. The so-called entry line luxury items must really

deliver the key brand specifications and experience. Their price must be far above

normal consumer product lines, to represent or underline the idea that there is not a

comparison in our brand’s luxury world, we are in somewhere else. When these

conditions are provided and implemented, the entry lines of famous luxury brands can

be perceived as luxury even though they’re sold at quite affordable prices. Unlike

premium products where quality is to be demonstrated and quite evident, what

consumers assume and expect about your brand is quite implicit in luxury. This is

why consumers will focus on other details and small extras. Here are some piece of

examples from authors’ work: A consumer has expressed that her small Hermes

bracelet is only €100. Even though it is not an expensive item, it is luxury. Another

one has expressed that her Dior nail varnish is €22,50 and it is luxury and she has a

good feeling of being a Dior client because of it has four times higher price than

normal nail varnishes. The other one has expressed that her €90 Guerlain fragrance is

her luxury even though it is not a rare or precious item, it is very well done and

convey the value of Guerlain and she has all know-how, quality, the prestige of the

brand and the special store experience. According to our research questions, these real

examples have shown that there are many ways to build successful accessible luxury

in the market.

When the brands’ results are interpreted monetarily, LVMH has had business traffic

ahead of 18 times and Kering has had a business traffic ahead of 15 times


Page 35: Thesis

approximately in comparison with the industry average of 17 times but, at the same

time, Michael Kors has had 33 times. In addition to their trade rates, it was expected

to happen 20 per cent rate of growth from Michael Kors in the upcoming years while

it will have an approximate 40 per cent annual growth. The other estimations have

stated that Michael Kors will make almost $400 million revenues despite the fact that

it was $50 million in 2011 and also the successful brand will make significant

investments in the luxury market while they’re going to continue to open shops

around the world because of the high demand. So, our research question may answer

in a way that it would be failure to ignore the millions of consumers’ expectations and

not to serve discounted luxury to the after we observe these financial results. As a

supporting role to these financial successes, in a recent survey (Hsu, 2013), The

American Affluence Research Center have found out that a third of wealthy

consumers had once owned a Coach item a lot more than essential luxury brands such

as Hermes, Chanel, Prada etc. A quarter of respondents have stated that the other

brands were so overrated in opposite to Coach. TheDreslyn.com, LA based website,

focuses on mid-tier designer brands such as Theory, Helmut Lang and Elizabeth and

James An average of $525 per order has been spent by its customers whose amount of

more than 48.000. The company’s revenue has surged by 169 per cent in a month

with an 89 per cent average of monthly subscription increase. Caruso, who professes

about linking brands and the owner of the Caruso Affiliated, is hoping to bring more

to his properties, which include the Grove in Los Angeles and the Americana at Brand

in Glendale. He explained that he is more comfortable there in comparison to too

much luxury. Because of their willingness to reach broader audience, they want to

drive the volume.

But when this affordability of the luxury market is assessed, it may be seen that Gucci

and Louis Vuitton are not the only sufferers of affordable and accessible luxury

brands, which offer substantial discounts or cheaper product lines. Mulberry, for

instance, which has announced profit apprehension in January and they have faced

sales drop after they raise the prices.

According to the most recent results that are announce by Bain & Co., the luxury

market will reach $300 billion. As we look at different countries’ revenues, US is the

largest luxury market with more than $86 billion revenue and is followed by Japan

and Italy. MasterCard advisors have stated that luxury market without its jewelry


Page 36: Thesis

lines, has faced the top spurt and it was the only category that have seen twofold

upswing over a year.

Ron Friedman, the head of the retail department at the consulting firm Marcum, have

indicated that Michael Kors and other affordable luxury brands such as Kate Spade,

have increased their net sales up to three times more than the previous year because of

their increasingly continue popularity. "The market for these brands doesn't seem

subject to the recession — their business is consistently getting better and better," he

has said. For instance, someone may prefer to buy Coach, wallet at a price less than

$200, which is quite affordable for many consumers.

Michael Kors has declared their financial reports in November and they have shown

that their earning per share is 49 per cent and it has been constantly increasing. Even

though Zacks has estimated $520 million total revenues for the brand, they have

surpassed it to $532 million. Also the sales that take place in retail segment have

grown by 82 per cent and number of new store opening has exceeded 60. These

results indicate that there is huge popularity and demand of the brand’s consumers.

High amount of demand for Michael Kors, successfully implemented growth

strategies and thus brand acceptance of consumers in Europe have provided many

advantages. Also premium is validated and successfully defended by the brand’s long

run return on equity of over 35 per cent and they’re actively reinvesting its earnings.

(Forbes, 2013)

In sum, luxury brands have to involve different consumer values as well as in the

luxury market. Because of the market’s structure, which is not homogeneous,

marketers have to consider individual differences and expectations while they’re

choosing or implementing their brands’ effective marketing campaigns, product

categories and situational characteristics. When it is assessed from the consumer side,

it should be known that every different products or services have their own unique

features and set of values and may be found more appropriate in some situations that

the other ones. If a marketer considers this approach, it would be a successful starting

point for a luxury brand.

After analyzing the structure of this heterogeneous market, we go back through the

consumer side to measure the variables that affect their perception and that show the

reason behind these extreme high profits that has been earned from the accessible

luxury around the world. Besides the literature definition of luxury and its borders, we

need to understand customers’ point of view on it. In a recent survey, consumers were


Page 37: Thesis

asked to explain what the luxury is for them according to their individual perception.

(Godey, Pederzoni, Aiello, Donvito, Wiedmann, & Hennings, 2013) (See Figure viii)

Respectively, from the least frequent word to the most frequent one that have obtained

from the customers’ evaluations are; expensive, quality, exclusive, desirable, dream,

excess, price, immaterial, cost, elegance. The authors have divided the answers into

two dimensions; first one is status, which is related with rare, prestige, superiority and

expensive. The second one is emotion, which is related with pleasure, dream, desire

and feeling. Another finding is there are some elements that have been obtained from

all around the six countries collectively that have been analyzed such as exclusivity

and prestige. These answers and categorizations should be considered carefully by

luxury managers because of the concept of democratization of luxury that have started

some years ago and supports the idea of everyone has an equal right to buy luxury

items, may weaken the value of luxury brands and also, it shows how luxury is

perceived by customers. (Letzelter, 1996) and (Nueno & Quelch, 1998) have

described the emergence of new categories of consumers and new conceptualizations

of luxury products, that are more accessible and lower priced under the purpose of

providing high status products to more amount of people to fulfill their satisfaction, as

the democratization of luxury which is our one of the main concern while assessing

discount possibilities in the luxury market. When we go further to answer our research

question and to investigate the ways of discount implementations to the luxury items

and services, the commonly used notion ‘democratization of luxury’ cannot be

skipped. For instance, seemingly elite brands such as Burberry have become devoted

to the so-called ‘’chav’’ people who have relatively lower-income in UK. (Bothwell,

2005). In addition to this, the notion of “bling” offers another countervailing cultural

discourse of the luxury market. Another trend is trade-up that means middle-class

consumers’ luxury purchasing while they’re paying less for other markets. (Houtz,

2004). (Evrard & Roux, 2005) (Turong, McColl, & Kitchen, 2009) have explained

“rationale has moved from conspicuous-elitist logic to individualism-democratic logic

because ‘everyone is worth it!’” This statement can be connected with the notion of

‘democratization of luxury’ that was explained above.

The so-called democratization process first has started in the fashion-apparel industry,

which is our one of the first concern in our assessment, and then it has been followed

by other industries. The luxury fashion industry has experienced a substantial

transformation from tailor-made clothes to ready-to-wear haute couture and then to


Page 38: Thesis

industrially manufactured ready-to-wear clothes. This evolution shows us the switch

from extremely expensive, rare and exclusive items for wealth consumers to less

expensive and more accessible items for middle-class consumers. The similar process

also have happened for other industries that compete or go along with luxury market

such as leather goods, shoes, furniture, watches, cosmetics, cars, yachts, service etc.

Nowadays, middle-class consumers with limited budget enjoy luxury brands that were

previously called high prestigious and exclusive in mature luxury markets like Europe

and US. (Catry, 2003). As a very new trend, low-income consumers have luxury-

labeled items to experience high status because of new-luxury’s high accessibility.

(Som A. , 2005) This new trend that is based on rationalization of prices in the luxury

market for affluent and non-affluent consumers, have given the chance to raise their

social status on their perception. However, contradiction to this approach and

successful financial results of these new luxury brands, super-affluent or wealth

consumers have not identified these new luxury products as valuable, because of their

willingness to possess exceptional and unique items. But, (Guyon , 2004) have

defined the new luxury as ‘look-what-I-can-afford’’ status symbol and have

interpreted consumers’ who cannot afford to buy these luxury items, assumed hatred

as one of the success of some new luxury brands. From this perspective, the

accessible luxury category includes relatively low-priced versions of exclusive and

expensive goods, which stays still at a higher levels than consumer good market and

verify our research concern’s justice.

The phenomenon has been explained above does not simply describe the

commoditization of originally rare goods. Somewhat, it has emphasized the

implementation of luxury labels to items that could not get this status before.

Especially, researchers and managers, who have discussed accessible luxury, have

categorized luxury level of items according to their degree of luxury. Some of them

have also added that critical success factors have played a part when they have

defined the different categories of luxury.

After democratization of luxury is assessed, we turn back to the authors’ assessment

on consumers’ perspectives on luxury. They have also drawn attention to the brand

extension, which is implemented by luxury brands to increase turnover and market

penetration. It is interpreted as some of these brand extensions are not clearly attached

to the core business and thus might be a threat to their brand’s exclusivity.


Page 39: Thesis

Luxury brands’ one of the most important function is creating emotional experience

with their customers, but in authors’ survey, it seems that they have not been so

successful to build strong relationships especially with their younger customers. There

are two reasons behind this weak experience: Young respondents are not acquainted

with luxury brands because of their age and also they have generally limited budget.

That’s why luxury brands represent a dream for them. Each brand must identify the

dream of exception it embodies. (Dubois & Paternault, 1995) have conducted the

dream equation as ‘’Dream= -8.6 + 0.58 awareness – 0.59 purchase’’ which was

reached after a empirical research. As it is expected, there is no any pricing effect in

this dream equation and there is a positive effect of brand awareness and there is a

negative effect of purchasing because of exclusiveness issue. With the same point of

view of snob people, the more people buy, the less impressiveness a luxury good gets.

At this point, we may naturally ask how a proper economical strategy of a real luxury

brand should be or how a brand can sustain its profitability if luxury does not focus

primarily on monetary values. In sum, if a luxury brand wants to build or to strength

its relationship with young customers, they have to consider emotional-hedonistic

luxury tools that have been defined above. (See Figure vi) The reason to mention is

that marketers should not primarily focus on high prices when they build a branding

strategy in luxury market because of the expectation from luxury is more than just

setting high prices for luxury goods and services.

However, even though this analysis classifies the consumers according to their

individual (conspicuous or emotional) approaches, it does not consider social aspects

of the society, which is not ignorable when we measure the determinants that affect

consumers’ perception. It should be considered also man-woman relationships in

today’s world when we want to discuss the social reasons of purchasing/using luxury

goods or services. Luxury boosts self esteem, express identity and signal status but

now, it is also important for man-woman relationships besides its traditional view.

(Wang & Griskevicius, 2013) Past research has shown that luxury products can

function to boost self-esteem, express identity, and signal status. Authors have

proposed that luxury items have interestingly signaling mechanism in man-woman

relationships. Men use these conspicuous luxury goods to attract attention to their

partners while women use these items to discourage their fellow. It has been made

five experiments considering both evolutionary and cultural perspectives to assess

how women’s luxury items affair as a signaling system affected at other women who


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astonish their romantic relationships. Findings have shown that activating enforce to

escort one’s partner provoke women to explore and show generous wealth. In addition

to this, related studies have told that many women use over-expensive luxury items to

show/signal that their romantic relationship is quite strong and their partner is

dedicated to them. Thus, garish and flashy luxury women handbags and shoes that are

gifted by mate may be perceived as a strong signal when determining their

relationship’s fidelity by other women. This research has identified a significant

function about luxury market; it has declared the luxury brands are generally used as a

gift item between couples and has an important actor in their relationships. It can be

even said that luxury consumption shows the degree of loyalty in relationships. In

addition, in a survey, which has been prepared by (Buss & Schmitt, 1993), has shown

the same direction with the previous research and defended that a man’s willingness

to spend and invest resources in a mate is considered a strong indicator of his

commitment to the relationship. Especially around women, there is a belief that if

their partner buys expensive jewelries to them, it shows their substantially strong

loyalty to the relationship. Interestingly, in a recent survey, men who show off luxury

goods are seen as more sexually charming by women. (Sundie, Kenrick, Grikevicius,

Tybur, Vohs, & Beal, 2011) This also explains why many men care more than ever

before about their appearance with luxury clothes, accessories and cars in the last

years. As an affirmative finding, even though it may be seen too much materialistic

approach for many people but according to (Fox, 2012), nowadays, the most romantic

gift that has been expected by women, is a gift card that allows them to spend its debit

in luxury stores. From this expression, we may interpret the results as when a luxury

is obtained at discounted prices to be presented as a gift, it may damage the

relationships of snob and materialist consumers because of their views that assign a

mate’s loyalty with high prices.

Without considering man-woman relationship (Oneto, Gelb, Walker, & Hess, 2013)

have defined four social proposals that affect consumers’ brand choices and by that,

they have researched a topic which assess discount effects on consumers’ perception

which is quite related with our research question. These for variables are occupational

prestige, status insecurity, status consumption and value consciousness.

Occupational Prestige; One of the past research (Milner, 2004) that has focused on

luxury items’ status degree, has defined our social life as an open-ended game that

people try to reach high level of status in many areas of their life such as work,


Page 41: Thesis

marriage, education, relationships etc. Nonetheless, increased level of status, which is

a return of purchased materialist items that are open to minority of the society, is one

of the easiest way to provide the desired status for many people. When we consider

the situations that require intellectual capital or patience, generally, we see that people

are avoid doing many things even if they think they’ll increase their status. According

to the authors, it has been exemplified the comparison between getting a Ph.D. degree

or completing a graduate school and buying an expensive luxury item through gain

social status. The second example is quite more feasible for many people. But when it

has been considered this situation from the business point of view, status seeking is

global and mainly beneficial presence for luxury market. (Leibenstein, 1950)

Status insecurity is the second proposal. The authors have referred people that have

uncertainty about their feelings, social standings and where they belong. Particularly,

some people may buy luxury items to signal their social group where they belong, and

some of them may prefer to buy these conspicuous items to avoid revealing their low-

class belongings in the society. (Veblen, 1899)

Status consumption is another variable that have been defined. The authors have

argued the process of luxury consumption and social consequences of this

consumption under the light of a consumer’s willingness to show his social standing

in the society. As a first time, (Veblen, 1899) have referred this as status consumption.

Status consumption has been defined as a motivational process in which individuals

try to improve their social standing through the conspicuous consumption that

includes high status items for an individual and the other people in the society.

(Eastman et al. 1999, p. 42). A consumer who is related with status consumption is

expected to fulfill his satisfaction with displaying publicly their social status to the

other people in the society; (Wang & Wallendorf, 2006) have noted that high

materialist consumer emphasis more on publicly consumed and expensive luxury

items and thus for these consumers, this kind of items means prestige and success.

Value consciousness is the last antecedent that has been defined as an attitude that

compares the paid price for an item and the quality or performance of it. (Lichenstein,

Ridgway, & Netemeyer, 1993) Value-conscious consumer would be pleased when

they have bought an item at affordable prices because of their thought that supports

it’s the smart way of shopping. These consumers have a strong desire to maximize the

ratio of quality received to price paid, and also a desire to pay low prices.

(Lichtenstein, Netemeyer, & Garretson, 1998) Because of their assessment about a


Page 42: Thesis

price/performance ratio of an item, they desire to buy non-luxury items that offer

similar functional quality at lower prices. On the other hand, even if there is a

possibility that they may go towards counterfeit market that provide high status at

lower prices, they would assess these items that have lower quality than non-luxury or

authentic luxury brands. (Cohen, 2005). In the sight of our research question, these

social antecedents and their managerial implications that concern different type of

consumers’ different expectations, shopping habits etc. are going to be interpreted

extensively in the discussion part where we conceptualize all related literatures that

try to show different possibilities to implement discount strategies in luxury market.

But at this point, it can be interpreted as discount implementations or lower priced

luxury items may bear consumers’ satisfaction because of these items’ high status in

the eyes of the society. As the research has had a quite narrow focus about social

approaches, it cannot be considered alone. As a complement view to these social

antecedents that determines consumers’ luxury consumption, in 2010, consumers

were classified into four categories to tag them easier and to take managerial actions

through marketing promotions, pricing and product categories under the light of their

purchasing habits as 4P’s of luxury; patrician, proletarian, poseur and parvenu by

(Han, Nunes, & Dréze, 2010) These four segments were defined according to two

categories’ interceptions; need for status and their possession of wealth (have or have

not). Patricians have wealth and their need for status is low, Proletarians have not

wealth and their need for status is low, Poseurs have not wealth and their need for

status is low and finally Parvenus have wealth and their need for status is high.

According to this four categorization, authors have interpreted these consumer types;

poseurs have limited budget but their need for status really high that means they

aspire to be like parvenus. To target poseurs, luxury brands may offer some entry-line

products, which have lower prices such as accessories, small leather goods, sunglasses

etc. Also, we can see as patricians have welfare to afford luxury products but their

need for status is low. Patricians’ willingness to pay a premium for luxury goods that

display the brand name less conspicuously is high. Because, they do not need to

demonstrate or show off that they have something exclusive to other people. To target

patricians, luxury brands may create more silent goods, which include smaller logo or

emblem with high prices to attract these people. (See Figure ii)

The findings have numerous implications for managers in the luxury market. First, the

findings have suggested that luxury managers should develop a griffe (from the


Page 43: Thesis

French word for “scratch”), or a set of special impression like a stamp for their brand.

Luxury brands should constructs sophisticated hints that express their items as their

unique design even if there is no ostentatious or enormous logo or brand name on a

product. According to the authors discourse, Porsche is already recognizable as a

Porsche; it is very difficult to confuse it with, for instance, Maserati or Lexus. Even

their subcategory product such as Cayenne is highly recognizable and clearly

distinguishable as Porsche. But it cannot be said the same thing for Mercedes when

we remove its star logo from its hood, there might be some misunderstandings while

passing through Lexus. Another example can be given with Gucci that is used its

distinctive bamboo logo on its sunglasses, purses, handbags etc. The griffe allows

patricians to signal associative desires to each other without sending the dissociative

message those parvenus do when they signal using loud products. In sum, it should be

reminded that they generally prefer to stay silent about what they have and how much

they pay for luxury.

Along with developing a griffe, firms first, should educate certain target customers

about these exquisite but recognizable details. For example, a Swiss manufacturer of

luxury watches Breguet has informed its clients about “the discreet decorative details

that constitute the Breguet style,” including the Breguet handwriting number

characters on its watches and engine-turned silver dials. Second, a luxury good

manufacturer may want to refuse to rise or boost its brand by popularizing its

trademark. Short-term sales can be increased by constructing a lower priced product

lines or extending the brand to multiple categories; these products are likely to sell

great if they are advertised with the prestigious labels of their high-priced forebears.

However, if the brand’s logo gets so much visible or if it is promoted in many

marketing channel, its unique and valuable mark would lose its value because of does

not have something to do with high status signal. This was a problem that Burberry

has faced in the 1990s when its trademark checked plaid or tartan (classic red and

white lines on a brown plaid) became quite omnipresent, over accessible and visible

and was integrated into every product categories such as from bikinis to trench coats.

On the contrary, it would be a problem to control and to compress value signaling

because of the willingness of parvenus to show their status to lower classes. Thus, a

delicate and sensitive balance must be provided as Burberry has done while it’s

decreasing the amount of loud products and has begun to add its signature undercover

for instance putting it subtly under a shirt collar and inside pockets. (Han, Nunes, &


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Dréze, 2010) have suggested that a total mix of quiet items have been known for their

quality, aesthetics, and other attributes with loud items that allow parvenus to satisfy

their consumption-related need for status correspondingly has supported Louis Vuitton

and Gucci to become the world’s first and third “most powerful” luxury brands.

(Sherman, 2008) (See Figure iii) Also, this research is an assistive resource for our

research question that shows for different implementations different customers may

be targeted by luxury brands and sometimes these discounted luxury items may

satisfy the brand’s customers and build emotional engagement with them.

As it has been mentioned, while we’re describing different customer types in luxury

market, we’ve seen that some of the consumers desire for uniqueness who have

mostly snob appeal and some of them desire for conformity on the demand pattern

who are mostly conformists. (Amaldoss & Jain, Pricing of conspicuous goods: A

competitive analysis of social effects, 2005) The authors have demonstrated that

demand among snobs could increase as the price of a product increases. However, the

demand among conformists, as well as the total market demand, would decrease as

price rises. In another word, to target snob customers who have dominated almost the

whole market, luxury brands should always serve top of the range items or services to

target or not to lose these consumers while they’re making their luxury brands more

accessible and affordable.

Downrightly, these models that have treated different approaches that affect luxury

consumers’ buying behaviors, are not separately sufficiently informative or

practicable to business models. Further researchers and managers in the market should

have a broader approach that combines individual characteristics, social antecedents

and also long-run financial business strategies. (Brun & Castelli, 2013) have

examined the nature of luxury according to consumer perspective and have explained

the new aspects of luxury which will be mentioned throughout this research to show

where luxury market is going through with its special features and requirement. They

have called the combination of contrasting as the modern oxymoron of accessible

luxury; from the beginning, the word luxury has been used for rare items that have

been created or served for exclusive people’s usage. In the old history, scarcity was

natural for many production process or goods but afterwards, the production process

and dissemination of luxury items has been generally linked with synthetically-

created scarcity because of regulatory laws that cares consumer regulations. Since

industrial revolution, the amount of wealth people has increased and luxury has


Page 45: Thesis

become more accessible by many people. In the meanwhile, as the progress of the

new manufacturing methods, it has been difficult to talk about natural scarcity for

many parts of the world that plays a part in luxury market. As a result, since the 20 th

century, the concept of ‘’democratization of luxury’’ has come into our world and it

has redefined the definition of luxury with a claim that everyone may access to have

luxury. Luxury goods and services have become more accessible than ever before to

many people. For instance, indoor plumbing, which was regarded as a luxury a

century ago, is a normal feature of every house (Hauck & Stanforth, 2007). This

process has resulted in the appearance and dissemination of accessible luxury

products. (Okonkwo U. , Luxury fashion branding, 2007) (See Figure vii) In the sight

of the our research question, we may pass judgment of the implementation of

discounts or lower prices in luxury is getting even more conventional without creating

a negative perception on consumers’ minds through the process of democratization of


Another perspective suggests creating entry-level product category to build emotional

engagement with consumers. (Kapferer, Klipperta, & Leprouxa, 2014) have stated

that luxury brands have tolerance on pricing. Price alone is used to qualify as luxury

only when the brand is not known by majority of the society. If luxury brands desire

to engage with new consumers, luxury brands can create entry line products as long as

they respect some conditions. The prices of these entry lines must reproduce the

positioning of the brand vis-à-vis competitors’ own entry lines. Chanel fragrances

should be priced above Armani or Dior fragrances, for instance, according to the

product category to which it belongs. The so-called entry line luxury items must really

deliver the key brand specifications and experience. Their price must be far above

normal consumer product lines, to represent or underline the idea that there is not a

comparison in our brand’s luxury world, we are in somewhere else. When these

conditions are provided and implemented, the entry lines of famous luxury brands can

be perceived as luxury.

Since we have assessed luxury market and its customers monetarily to answer our

research question, it can be seen that pricing issue is quite ambiguous on customers’

mind. In a recent survey (Kapferer, Klipperta, & Leprouxa, 2014), two questions were

asked to consumers. The questions were; ‘below what price would you say a ring is

not luxury?’ and ‘at what price would you say a luxury ring starts?’ The received

answers were quite far away from each other and there was a gap between two


Page 46: Thesis

answers as €853. According to the participants, the place is not clear where luxury

stops and where it starts. Here, differently from traditional marketing, the authors

have supported the idea that luxury sets price; price cannot set the luxury. It would be

purposeless to rigidly refuse the flexible discount strategies while it can be exploited

by many luxury brands. However, (Du, 2009) has examined the pricing approach of

luxury goods with a behaviour perspective model. Behavior perspective model

suggests that reinforcement and punishment play a critical role while motivating

customers’ purchasing behaviors through their value perception. Utility theory

explains that a customer will make a judgment on a good’s utility and compare it with

the amount of money that is needed to acquire it and then make the payment if it is a

good deal for him. Utilitarianism plays a leading role in the new type of luxury

because of its customers’ high value consciousness. Environmental setting is another

crucial actor that affects consumers’ price perceptions. As essential luxury stores have

elegant, sophisticated apparel and they are generally located in premium areas with

decent decoration, environmental setting has an extreme effect on consumer

perception. When they are assessed together, a message is tried to send to customers;

you are going to receive a high quality service, acquire superfine goods and get others

admire. Utilitarian reinforcement and informational reinforcement bring value to the

goods the customer will purchase and customer behaviour setting brings value to this

process of shopping. Learning history is another component of the behavior

perspective model that influences customers’ perception among a luxury brand

externally with their past store or purchasing experience. The author has discussed

how to understand the price of a luxury good from BPM perspective to provide a

comprehensive framework that includes an index was gathered to investigate how

much the price of a luxury good is based on the utilitarian reinforcement. This index

directs luxury managers when they go through different promotions in the market and

also where to focus. When different parts of BPM are connected to each other, it

might give an idea about the possibilities on discount implementation, changings on

store concepts instrumentally because of its narrow focus on consumer psychology

and not to consider cultural, global changings of the market. Environmental setting

and reinforcement has been considered without its legitimate use on behavioral

analysis. For instance, it should be accepted that consumers’ expectation has changed

and brand managers should go beyond traditional luxury store concept to satisfy the

global market requirements. This environment can be built by visually attractive and


Page 47: Thesis

prestigious stores or some parts in department stores (Ralph Lauren in Galeries

Lafayette), advertising in glamorous magazines (Hugo Boss in Vogue), holding

seasonal fashion shows or exhibitions (Calvin Klein in New York), and signing well-

know designers (e.g. H&M and Karl Lagerfeld). Also, acceptable, satisfactory and

tolerable price premiums should ensure limited accessibility even if the brand goes for

a masstige strategy through the luxury line. For instance, middle-class consumers

should access to these items only on occasional situations. (Turong, McColl, &

Kitchen, 2009) If they would purchase these items frequently or as habitual or the

brand would be over accessible and affordable like consumer goods, brand dilution

would occur and it would lose its exclusivity. In sum, masstige strategies may be seen

as an opportunity to traditional luxury firms as long as these two recommendations

are respected. According to the authors’ ideas, it can be interpreted that discount

strategies can be implemented to the luxury brands’ marketing index but as long as

they ensure to offer high level of satisfaction to luxury consumers.

In the sight of the idea above that suggest building visually appealing and prestigious

stores while presenting satisfactory and tolerable price and limited accessibility in the

luxury market, it should not be forgotten the existence of pop-up stores as a very

successful implementation when luxury brands want to build strong emotional

engagement with their customers. Pop-up stores take their names from the pop-up

windows that appear suddenly on computers’ screens, on webpages pages for a brief

period. In line with this, pop-up stores remains only for a brief period to attract

consumers’ attention to the brand. The length of the operation ranges from a couple of

days to one year according to company. Pop-up store basically creates a concept for

the event with the aim of attracting the interest of media and creating curiosity among

consumers. In several European cities, as well as in Asia and Americas, this new type

of retail store is built by many brands and several number of luxury brands has

opened pop-up stores such as Chanel and Hermes in Paris, London, Berlin, Madrid,

New York and Tokyo. This new type of retail, which is event-centered type of brand

communication, is quite effective for luxury brands in terms of sales and products

rotation of luxury goods and also they are reported and mentioned on media and on

blogs largely. The locations are chosen for these pop-up are quite surprising, because

of their proximity to brands’ main store. This research (Lassus & Freire, 2014) has

contributed a better understanding of the evolution of the luxury market and its

specific marketing and communication techniques while the authors were considering


Page 48: Thesis

the behavior of consumers of luxury market in both the main stores and their pop-up

luxury stores. After the authors have learned that most French luxury brands have a

website offering some of their products for sale and 90% of web comments about

luxury brands come from Internet users (Sicard , 2010), they have decided to make a

netnographic research. At the end of a semiotic and netnographic analysis, the authors

has concluded the issue as; These luxury pop-up stores strengthen the brand’s

mythical aspects, provides perfect adaptation of the offering and they are seen as a

complementary to the main stores of the luxury houses even though they have more

and more accessibility and friendly store atmosphere than the main stores. These two

channels mutually support each other while the brand is broadening its customer base,

the number of outlets, and types of offerings, stores’ interior designs and product

presentation. With this type of retail stores, the brands does not only fascinate their

current loyal customers but also to younger newcomers who have willingness to

experience these luxuries and have a possibility to be loyal customers in the future. In

the sight of our research question that cares about consumers’ perception or action as

a reaction to discount implementations, it can be said that in these pop-up stores,

luxury brands may offer partly discounts for a limited time, without damaging the

brand’s status and exclusiveness. Luxury has long been subservient to the elite /

wealth customers (Chevalier & Mazzalovo, 2011), but now it has a broader customer

base more than ever before and in Western societies, it is more oriented toward

experience rather than purely conspicuous consumption. (Lipovetsky & Serroy, 2013)

Thus, pop-up stores may fulfill this broad range of customers while offering new,

uncommon store experience. In contradistinction to traditional marketing, luxury

should be marketed in a delicate balance to fulfill expanding demand of customers

and to protecting brand’s exclusivity and image in the presence of the rising

consumption of counterfeits, parallel imports, over brand extensions, miscarry of

brand members etc. (Xuemei & Veloutsou, 2007) That’s why these stores are kept

open only for a brief period.

If someone evaluates pop-up store in luxury market, it should be remembered that the

strong growth in the luxury sector reflects the consumer’s search for emotional

benefits. (Turong, McColl, & Kitchen, 2009) (Hennessey, Exceptional people,

extraordinary journeys: The new LV core values advertising campaign, 2007)

(Ostapenko, 2013) It is undeniable that the price of the most luxury products is

unaffordable. Luxury has to assume other features to attract and, if possible, charm


Page 49: Thesis

consumers and thus it should be seen as an obligation to create more aspirational and

charming concepts to provide emotional benefits to consumers. (Lassus & Freire,

2014) have concluded their research as follows; Luxury pop-ups strengthen the

brand’s mythical aspect: Many consumers are influenced by the glamour of pop-up

stores that bring many innovative and attractive appeals to luxury brands. Perfect

adaptation of the offering of pop-up luxury stores to potential demand: Pop-up luxury

stores develop new ways for selling luxury and allow brands to think outside of the

box. Complementarity of parent houses and pop-up luxury stores: the two channels

mutually support each other because of enriched customer base, offers, store designs

etc. While a brand attracting new consumers, especially young and budget customers,

and raising its awareness without damaging exclusivity, and also obtaining successful

financial tables from it, it can be defended that there is a convenience between

traditional/accessible stores position and the mold of pop-up stores and in the sight of

our research question, these stores can be a quite impressive tools to implement

discount strategies without creating negative perception on consumers’ minds.

As another trend in the luxury market, accessible luxury brands have started to move

crowded and upscale shopping areas with flashy designs such as Tory Burch and

Dsquared2’s movement to Rodeo Drive in Beverly Hills. Robert Cohen who is

executive vice president at RKF, has liken their actions as their willingness to play in

a sandpit where there are some luxury guys who might be aspired with new luxury

features. High-end retail brands and Shullman research center has interpreted this as

even though they do not like, they need to get support from mass-market consumers.

(Hsu, 2013)

In a similar form of moving into mass as it is done with pop-up stores, online flash

selling aims to build strong consumer engagement with accessible and affordable

items as discounted or lowered price on digital/virtual platforms. While there is huge

global wish for luxury goods in terms of ‘democratization of luxury’ and

‘luxurification of society’ which have been defined several times by many authors

(Atwall & Williams, 2009); (Tsai, 2005); (Yeoman & McMahon-Beattie, 2005),

luxury brands nowadays are facing the challenge of using mass marketing strategies

while at the same time, they’re emphasizing the exclusivity dimension of their

products. (Okonkwo U. , Sustaining the luxury brand on the Internet, 2009) The idea

of moving “sample sales” online was first realized on a European website, Vente-

Privee.com, which now has more than 13 million customers. Discount luxury


Page 50: Thesis

websites mainly serve as online platform for the “flash sales” method, offering

limited-time availability of high fashion, travel, home décor, and culinary bargains to

its members. After gilt.com enters the market in US, flash sales have rapidly risen and

led to launch many websites that have provided impressive discounts on luxury items

to consumers who search for high status and also have provided to unload the unsold

stocks to companies. The author (Ostapenko, 2013) has found that many websites go

through ‘customer fatigue process’ and long lasting success requires deeper

understanding than just offering high amounts of online discounts.

(See Figure v)

The flash sales model is Gilt’s one of the most significant core strategy and this

strategy mainly forces or motives consumers to buy the item before it is sold in a very

limited time. But when wealth consumers considered, it might be seen that they prefer

mainly to buy luxury at full prices in luxury stores while they make more meaningful,

thoughtful and experiential shopping rather than competitive one.

Gilt and the other flash selling websites give free membership to consumer because of

most people’s high level of price sensitiveness, they have willingness to tolerate the

downsides of Gilt such as old season’s items, competitive shopping etc. As the time

pass, its seen that consumer have had more unrestricted income and they can drill

power of companies in the market, wholesales prices have risen and Gilt has raise the

discount from 70% to 40-50% and also because of decreased enforcement on bottom

pricing by suppliers. (Barr, 2011) It should be noted here that Gilt generally buys the

product at 50% off wholesale price. But anyway, it is seen that they make a

considerable amount of profit. The owners also have organized some events wherever

they travel which are upscale ones include Gilt’s most loyal customers, bloggers,

journalists etc. They have cared about personalized experience that’s why invited

guests with handwritten notes and consequently they were featured in many

magazines around the world. It was a genius marketing strategy that emphasized the

exclusivity in line with luxury strategy. In addition to their successful marketing

strategy, they have allowed membership to only a limited amount of people have

allowed them to grow slowly and consıstently while they’re building loyal customers

to them.

In the process of economy goes even better, the sense of exclusivity will be rebuild by

discounting in the luxury market not by reselling. (Contributer, 2011) For instance,

Lela Rose, a profitable and well-desired fashion brand whose price range runs along


Page 51: Thesis

$1,000 to $10,000, has preferred to sell her items on Gilt and later on, she told to

suppliers that consumers might say ‘that’s what I have bought when I had no money’

On Gilt, most of the sales last in 36 hours literally but often, stock, which is offered as

a limited amount, sells out earlier than 36 hours because of high demand. Indeed, 50%

of the revenue is obtained within one hour after the beginning of sales. This is a kind

of competition or pressure for consumers but it is the key element of the website’s

success and it has been outstandingly profitable.

This platform has provided an opportunity to sellers as well; they have a quick inflow

of cash, which is always needed by most of the small brands especially during the

recession times.

Gilt’s one of the most significant success has come from its design of website. Even if

it is completely online and accessible 24/7 to customers, they have reflected the

luxury’s elegance and sophistication on its storefront. The website is divided into

categories such as men, women, sales etc. Upon log in, men are directed to Gilt Man

assigned part. Also, the photography is quite professional which reminds nearly a

glamour magazine ad than a retailer website.

In addition to its successful marketing strategy and content-rich platform, Gilt has

developed its online platforms to increase consumers’ accessibility even more. When

an immediate flash sale starts, lets say at 12 p.m., your mobile app warns and allows

you to browse the sales even if you do not have a computer at that time. The success

of idea can be seen from the results that shows thirty per cent of Gilt’s revenues come

from mobile app purchasing while it goes up to fifty per cent on holiday weekends

when most of the consumer do not have their computers with them. As a necessity of

digital platforms, Gilt innovates its mobile app constantly, which will allow consumer

to upload their photos and ‘try on’ items such as accessories and fragrances, in the

upcoming updates, which attracts consumers’ attention, and encourage them to buy

more. (Chen, 2012)

As another outstanding example is the discount club Little Emperors

(http://www.littleemperors.com) which offers customers deals up to 60 per cent from

a range of luxury brands including Cartier and Jimmy Choo at the same time it offers

discounts on experiences and services such as holidays, personal care catering etc.

This new trend is called mercurial consumption and it is popular among customers

such as luxury for rent. (Yeoman I. , The changing behaviors in luxury consumption,

2011) These two examples have been shown to indicate that luxury may have some


Page 52: Thesis

discount and even they can implement this on digital platforms as a result of changing

behaviors in luxury consumption. But there are some elements that should be

considered carefully to make the platform profitable and successful.

Lazaro Hernandez has stated that even though they do not use Instagram regularly on

a personal level, they have ben fascinated by social media on a creative level, co-

designer of Proenza Schouler, which is a NY based women clothes and accessories

brand. Nowadays, while a limited amount of people is able to take a part and

attending to the fashion parades, many people on social media is invited via brands’

posts on their social media platforms. Social media is a great tool because of high

possibility of engagement, tool of creation, inspiration or as an art. Consumer are not

interested so much in highlighted information, they would like to see more behind the

scenes which are the situations they cannot see without company’s self sharing.

Proenza Schouler has taken this concept to heart for their runway shows. As a young

brand, it has realized that it cannot compete with the phenomenon luxury brands such

as Chanel or Louis Vuitton; consequently, they have known that they had to do

something different to shine their status or reputation on consumers’ eyes. (Jones,


However, to consolidate the implementation of discounts on online platforms, there

are some dimensions that have to be respected. Even extremely high prices are

broadly appreciated as one of the requirements of luxury strategy, (Kapferer &

Bastien, 2012) have stated that the luxury is qualitative and not quantitative. Social

and psychological improvements always have to be provided by the consumption of

luxury items. (Okonkwo U. , 2009) Also, the price-value relationship is at the center

of luxury strategy. As Even though Internet becomes one of the first tools buying and

selling and generally it is linked to accessible shopping habits, the price premium

should be linked with unique and exclusive items, high quality, special craftsmanship

and outstanding personalized service and also these specifications and characteristics

of luxury must be ensured on virtual platforms while guaranteeing limited

distribution. When consumers use the website and its applications, online

environment’s usability, quality and uniqueness are included in functional value of

luxury as supplemental to product-related features. Even though there are not all five

senses in online shopping, online platforms may rebuild luxury brand’s character

outstandingly via music, texture, space and interactive community. Even though

wealth luxury consumers are massive Internet users, more added value dimensions


Page 53: Thesis

need to be provided to engage these consumers with the brand by luxury brand

managers. Added value dimensions do not only refer to aesthetics and creation of

marketing products; also entertainment, education, utility etc. have to be considered.

When we turn back to the concept of luxury, consumers’ emotional and individual

needs should be satisfied by luxury brands’ individual identity projects. (Bauer,

Wallpach, & Hemetsberger, 2011) Majority of the consumers perceive luxury as a

symbolic resource that builds significant tangible signs and defines their personalities

while transferring brands’ social symbols such as exclusivity, authenticity, high

quality, uniqueness and culture. In addition to individual value of luxury, the offline

appearance, such as store atmosphere or brand’s history, should be transferred to

brand’s online platforms by luxury brand managers to involve customers more

attractively and consistently.

The social aspects of the concept of luxury contain individual consumers’ social

groups in the society and focuses on online social networks. As it has been stated

above, most of the wealth consumers use Internet massively but not all heavy Internet

users are luxury brands’ customers. This has been suggested by the authors

(Hennings, Wiedmann, & Klarmann, 2012) that through Internet and especially with

social media, these people may potentially be attracted to the brand and in the future

correspondingly they may be a loyal customers or brand advocates. While consumers

buy or use luxuries to signal their status, they promote the brand at the same time in

their social environment. By using proper strategies, this can be obtained on online

platforms as well.

As a successful reflection of luxury on online platform, Louis Vuitton.com is an

outstanding example even if they do not implement any discount or flash sales

strategies on both online and offline. It emphasizes brand’s core values through

navigability, fascinating visuals and a deep focus on brand culture & history. Internet

is generally used to gain information by consumers, thus, the prices are presented just

to inform customers with a smaller type size not to evoke other consumer goods

which is in line with the brand’s offline price strategy.

Also Gucci.com is well positioned in the social web. The company’s heritage is

emphasized and also allows consumers to make personalization on the website. Other

positive features are easy navigation and extensive product information that considers

customers’ financial and functional values into account.


Page 54: Thesis

As detailed product information and their prices are given properly on burberry.com,

it is a good example for online luxury selling even while their focus is not mainly on

monetary values. Special and also personalized information is offered on the platform.

However, not like the literatures that have put louisvuitton.com and gilt.com in the

same equation, (Walley, Custance, Copley, & Perry, 2013) have suggested separating

‘absolute luxury’ and ‘accessible luxury’ in terms of our main dilemma between

exclusivity and accessibility. They have explained this according to new aspect of

luxury; Authors have compared a middle-class consumer with an upper-class

consumer in line with their frequency of purchase, degree of involvement and

required investment. A middle-class consumer would buy less frequently, involve a

large part of his income and require the investment of a significant amount of his time

while an upper-class consumer would buy frequently, involve a small part of his

income or wealth and a little time spent to give a decision. In addition to their

purchasing habits, their nature of decisions are quite different than each other. A

middle-class consumer would focus on financial implications with high level of

involvement while an upper-class consumer would focus on social aspects with a low

level of involvement. Thus, it can be seen how luxury is accessible or inaccessible to

different customers who have different economical power and this distinction should

be considered by percipient luxury managers to engage with different types of

customers effectively. As a consequence, it is now useful to think of luxury in terms

of “absolute luxury” and “accessible luxury”. While “absolute luxury” may still be

related to social stratification, “accessible luxury” is a comparative concept, which

has an element of social distinction, based on status. In the sight of the view that

divides luxury into accessible and absolute, not a solid classification when it comes to

discount because of its unifying foundation that interpenetrates them.

Ultimately, luxury brand managers need to be sure about their brand’s position in

future in the market. (Mckinsey&Company, 2010) has identified the five trends that

should be considered by luxury marketers. They’re hunting for value, increased

desire for the exceptional, searching for a meaning, moving online and shifting to

emerging market.

Luxury companies should consider these conversions to realize the market’s future

because of the idea that indicates changed/transformed behaviors of luxury customers.

According to the report, more than forty per cent of Americans and almost a third of

Europeans have said that even after the economic crisis, they are going to prefer to


Page 55: Thesis

buy luxury items only when they are on sale. In general majority of the consumers do

not want to pay to much money for fashion items as it is stated ‘hunting for value’

even if they’re in luxury market. Also, luxury purchasing is more premeditated than

fast moving consumer goods purchasing. That’s why luxury market’s customers

expect more. They require more customized products or services that is made upon

their order. They want to buy products that can be used frequently and is packaged

emotionally. Even though there are different customers who have different judgments

on discount or price tags, luxury brands should emphasis on charming details that

makes consumer superior, feels them exclusive to satisfy their increased desire for

exceptional. Also, consumers are getting more than ever before responsible in their

luxury consumption and have more awareness. Many luxury customers – over forty

per cent of consumers in United Stated and Europe and over fifty per cent of luxury

consumer in China - avoid being seen as antipathetic with their luxury consumption

and feel guilty about the money they have spent. Above all, people are incrementally

concerned about social issues labor rights, environmental sustainability, ethical trade,

animal rights etc. It should be considered carefully by luxury brands to fulfill their

search for meaning because of luxury consumers’ statements that express social issues

direct their luxury purchasing. In addition to personal and social transforms, the way

of selling has been changed. Online luxury selling increases its share gradually (from

3 per cent in 2009 to 5 per cent in 2011) in the total sales. But it is expected to grow in

the following years because of the proof that upscale department store shoppers’ huge

spending time as online. At this point luxury managers need to be careful when they

provide the transparency and accessibility of online platforms while they keep a

certain level of exclusivity and luxurious.


Page 56: Thesis


In this master thesis, it has been aimed to examine luxury market’s different

dimensions and various discount implications to guide luxury brands when they set

their pricing strategies with respect to customers’ expectations and also to provide

understanding for future researchers who want to assess further pricing strategies in

the current luxury market. This is quite significant because nowadays, in luxury

market, emotional benefit and customer engagement is important as conspicuous

consumption. It means that managers and marketers need to be careful about their

customers’ anticipation in luxury market more than other markets because of the

importance of loyal customers’ interest in luxury. It means that we need to cross the

border of traditional luxury marketing strategies.

This research is also a significant resource for future researchers who want to gain

different point of views and information from one resource and have a desire to

collect all related documents about different pricing strategies in luxury market while

regarding to customers’ perceptions to these differences. This master thesis might be a

credible resource for further empirical or conceptual researches because of its various

and confidential references that was given properly at the end of the thesis and the

results that were extrapolated under the light of these references.

Principally, it has been benefited from International Journal of Business and Social

Research, Journal of Advertising Research, Journal of Brand Management, Journal

of Consumer Research, Journal of Current Issues and Research in Advertising,

Journal of Economic Psychology, Journal of Economics Journal of Experimental

Social Psychology, Journal of Market Research, Journal of Marketing, Journal of

Marketing Theory and Practice, Journal of Personality and Social Psychology,

Journal of Product and Brand Management, Journal of Retailing and Consumer

Services, Journal of Revenue and Pricing Management, Journal of Services

Marketing, Journal of Social Behavior and Personality and Journal of The academy

of Marketing Science. Also, it has been read The American Economic Review, The

Wall Street Journal, Harvard Business Review, Financial Times to gain insight about

the most current information and evolutions about the luxury market.


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Jean-Noel Kapferer was unforgettable giude for us when we read his The Luxury

Strategy book, which should be a reference guide for all marketers in the luxury

market. He has helped us to conduct our results part with his miscellaneous


Research Overview

As it has been stated in the introduction, this is a conceptual research that assesses

different journals, academic literatures, statistical information, some columns and also

online resources. It has not been seen as a necessary to make experiments and surveys

to conduct conclusion. It may be provided by further research.

Selection of resource was one of the most important parts of this research. We have

aimed to be a guide for future researchers and also for luxury marketers. We have

aimed to provide them a confidential work that’s why we have selected the most

proper publications to our subject and the most credible ones according to their

grades. (VHB, 2009)

Research Design

The research will employ secondary data kind of research design where data will be

collected from the related literatures. This kind of research design will best suited to

collect the information from the secondary data. In this regard the researcher will be

able to gain information with the related subject from one resource, which will make

it possible to understand the dynamic factors of the research with well-coordinated

way. One advantage of qualitative research design while we’re collecting secondary

data, is that the researchers will have a chance of being informed from a single source

about the world of the luxury market and discount effects in the market which is our

main concern in accordance with the research question which is ’Does discount create

negative effects in consumer’s perception in luxury market?’’ Before we have

extrapolated our research question discussion with the professors from the Universita

della Svizzera italiana, secondary data analysis in a qualitative research way were

involved as the origin tasks.


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Whilst we have mentioned about various markets so far such as hotel, airline,

automotive etc. we have mainly based on luxury fashion retail industry. Thus, we

have focused literatures and have selected our real life examples in accordance with

the retail industry.

All these literatures do not have the same or even similar approaches regarding to our

research question. Some of them were based on empirical researches such as real life

experiments or surveys; some of them were based on conceptual researches such as

previous literatures’ review. Also, their colloquial expression was quite different.

Some of them have preferred to use real brand names as we have done in this thesis.

But some of the articles have avoided using brand names because of various reasons

in the competitive business environment related to legal issues. With regarding to

their different point of views, we have assessed the existing literatures comparatively

to evaluate different approaches together. We have completely focused on our

research question and how luxury brands can implement discount strategies to sustain

or increase their business success without creating negative effects consumers’

perceptions in the market.

In the literature review part, all of the information from respectful authors has been

given without any personal comments, inducements or further recommendations

because of our willingness to provide objective results to the researchers who wish to

work on luxury market also to the marketers and managers who wish to benefit from

academically literatures in their professional business. After we put in order them

according to logical process in an understandable way, results have been given in the

next part. In the discussion part, we have added our recommendations and comments

to reach a proper conclusion to answer our research question.

When we have defined the research question, we have planned to introduce the

transforming structure of the market with financial results of the successes of new

luxury. Henceforward, respectively, it has been continued with geographical structure,

consumers’ different approaches, product classifications and new trends have


The authors of the resources (bibliographies) are indicated alphabetically at the end

of the paper in accordance with APA (American Psychological Association) method,

in References part, before exploratory and supplementary appendices have been



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In the literature review part, it has been aimed to specify all the information related to

our research question, which is ‘’Does discount create negative effects in consumer’s

perception in luxury market?’’ In accordance with our literature bases, we have

conducted several discount strategies that answers negatively to our research question

because of the proofs of positive outcomes with these discount options.

Despite the fact that there has been some thoughts that have not supported discount

implementations in luxury market, we have addressed this conceptual research with

secondary data that includes literature review and as a result of this, it has been

concluded whilst we have given a negative answer to our research question.

As it has been mentioned before, luxury marketing strategy is extremely different than

traditional marketing approaches, thus, there are many overlapping ideas that support

different implications. Previous researchers and luxury marketers who are line up with

the definition of traditional luxury that is exclusively distributed, over-priced,

inaccessible for majority of the society, something rare, might prefer to stay away

from the idea of cheapening or discounting the luxury as we have seen in the literature

review. But when it is assessed carefully, it can be seen that there are multiple

positive outcomes for luxury brands that are able to implement effective discount

strategies without damaging brand’s prestige and exclusivity in accordance with the

transformation of luxury and thence its customers’ expectations. Marketers should be

supersensitive when they apply these practices to their luxury brands because of the

importance to know when and how to apply it.

Here, it has been listed the discount implementations that answer to our research

question as ‘Discount does not create negative effects in consumers’ perception in

luxury market’

Luxury brands may offer lower prices for their entry-level products, which are

defined as a version of a product designed for someone buying this type of

product for the first time and produced in a limited amount. Entry-level

products are usually the cheapest in a luxury brand’s product range. (Financial

Times) With these cheaper lines, a brand would address young customers who

have generally lower financially allowance than adults today but potentially

will have higher incomes in future than today. Also, a brand would bridge an


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emotional engagement with these kinds of customers who have a huge desire

to own an item from the brand such as Mercedes have done with its C series

cars by affordability. Customers who have lower incomes but have a desire to

buy luxury goods would appreciate these accessible entry-level products and

the brand would avoid them to go towards counterfeit products with this

strategy. We may count low-price items as entry-level products for instance

accessories and fragrances. This does not bother the loyal customers who has

strict adherence to the luxury brand and spend a lot of money to its most

exclusive items, because of their unconcern to these people and their different


Luxury brands within the traditional luxury strategy, may build a new type of

luxury brand to catch the business requirements because of many new type of

luxury brands’ accessible and affordable items’ substantially successful

revenues and also to fulfill middle-class consumers’ expectations while

they’re creating strong emotional engagement.

Luxury brands may offer discounts for end-of-season items in their own retail

outlet stores to protect their brand exclusiveness. As long as these stores

reflect the same atmosphere of the main stores, there would not be any

negative perceptions on consumers’ minds.

Luxury brands may offer lower prices or discounts on Internet. Online selling

is preferred by many customers nowadays and when it is implemented

properly, there would be no problem to exploit it by luxury brands even if it

undermines the feeling of exclusivity, reduces the myth of inaccessibility and

diminished the personalization of the transaction. At this point, in line with the

notion of luxury, these online selling websites has to sustain the certain level

of elegance and sophistication. For instance, the photography should be highly

professional and with highest resolution, price tags should not scream. They

should offer limited time (last in 24hours) discounts for limited products.

Otherwise, it might have been perceived as an online retailer, which sells

ordinary consumer products. Also, they should offer personalized

communication via 7/24 connections to customers to minimize the weak line

of this distribution. It should not be forgotten that luxury is about experience

not about just selling the items. Additionally, these online websites give an

opportunity to luxury brands to influx of cash, which is always welcomed by


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any brands. Another utility of online selling is for customers who do not have

luxury stores in their resident areas and have a desire to buy luxury items.

Even tough the Internet reminds something cheap, luxury brands may exploit

this platform for many effective opportunities in the market. They may create

a delicate balance between accessibility and exclusivity with these online


Luxury brands may offer lower prices or discounts to their customers who

have different needs and personal characteristics than traditional luxury

market customers. The reason behind to examine the different types of

customers in the luxury market was that to understand their different

expectations and current financial and social position to get out the proper

discount implementations. There are many conformist customers who do not

have a snob appealing and who are generally value conscious in luxury

market. To address these kinds of customers, luxury brands may offer

discounted products at the end of each season for limited amount of products.

It may help brands to build emotional engagement with these customers and

may reduce to possibility to go them towards counterfeit market without

bothering the loyal customers. Because of loyal customers’ interest area is

mainly consists of other loyal customers’ purchasing habits and their luxury

item preferences are often not related with the conformist or entry-level

product purchasers. But again, it must be respected to the nature of luxury and

the prestige of the brand. These discounted products should not be announced

with bigger type size nametags on the display windows, which may damage

the sophistication of a luxury store atmosphere.

Luxury brands may offer customized discounts to their most loyal customers.

To increase loyal customers’ pleasure, brands may offer customized discounts

that provide future purchasing after they leave the store gratefully. As it has

been mentioned before, personalization makes sense a lot in consumer

perception in luxury purchasing such as home delivery. When these customers

get a discount from the luxury brand, they would perceive it as a personal gift.

In line with the general perception that defends luxury is often referred with

being a gift between families, couples, social environment etc., making a loyal

consumer feel special from the brand side, would strengthen their commitment

to the brand. Luxury marketers should pay attention to be understood as


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legitimate in personal discounts to the other customers not to be perceived the

situation as injustice. These customized discounts may increase the customer

engagement and their commitment to the luxury brand because of making

them to feel exclusive and special for the brand.

Luxury brands may offer lower-priced products via creating different product

lines (line or brand extensions) for value conscious, price sensitive, day-tripper

and excursionist customers. For many marketers, it may have been perceived

as a loosing pricing power of a brand but when it is done properly while

providing the standard high quality, luxury brands sustain their business

successfully in their different lines as Armani has done with its six sub-lines

that are Armani Prive, Giorgio Armani, Armani Collezione, Emporio Armani,

Armani Jeans and Armani Exchange. At this point, the most significant

element is to ensure the integrity. There must be only one brand, one website,

one distribution channel and a creative consistency between the sub lines.

Even if Armani Exchange has the most affordable items in the brand lines, it

cannot be perceived as unqualified or unsophisticated.

As a new trend, luxury brands may build some pop-up stores where are closely

located to their main stores. In these stores, luxury brands offer friendly, easy-

going atmosphere while they are offering some discounts to target more

people and especially outside of the core customer group. Pop-up stores may

be impressed accessible and are appreciated by many customers but to protect

the exclusive brand image, these stores should remain opened only for a brief

period. This does not create any negative effects on consumers’ mind in

luxury market. Main luxury stores and its pop-up versions have completed

each other as a mean of different offerings to different types of customers to

target the brand’s large environment. It should be noted that the idea of

sophistication and refined taste must be reflected to the pop-up store concept

for not to be understood as a common retail store.

All of these results listed above, as answers of our research question that is concerned

about the discount effects in luxury market, have been constituted by democratization

of luxury. While the time is passing and with the luxurification of society, more

people have demanded to luxury market. But as long as everyone has different

budgets, their requirements and purchasing powers are different. Thus, luxury brands

should exploit all of them with appropriate discount strategies.


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Under the light of results that have been constituted via our literature base, we may

build an overall concept as a theoretical contribution that guide luxury brands and

future researcher when they go through accessible luxury strategy;

An established luxury brand that has a history more than a century, with a good

reputation among customers and have a financial success in its long-term, may adapt

new trends in the luxury market to sustain its success in the future. Every luxury

brands should follow these new progresses to catch customers’ aspirations through

new channels without creating negative effects on their perceptions. This concept is

going to be explained without a specific brand name to purify from existed pros and


The brand should offer entry-level product category for every single season in a

limited amount. This category should not surpass 10% of the whole range and the

price should be relatively accessible by many customers. The brand may transform its

website’s one part into an online store that enables flash selling for new items or also

may choose to sell its old-seasoned items on 3rd party websites for a brief period and

for a limited amount of items with an emphasis on its history and uniqueness. If the

brand is afraid to be understood as it looses pricing power with the affordable

products, it may be extended into different lines that are related with the original

sophistication and high quality of the brand name. In addition to go through brand or

line extension, this brand may announce that its main designers emphasize on another

brand that offers more accessible but equally charming luxury to its ‘younger’

consumers without using its secular brand name. The brand also may choose to build

pop-up stores while presenting its most classical items to the larger groups to raise

awareness or also may prefer to sell some accessible items to gain new customer

groups to compete with emerging luxury fashion brands.

In this concept that includes new trends about luxury strategy, luxury managers

should focus on to be consistent with the core structure of the brand and try to sustain

its exclusive and elegance spirit in all the new channels. Thus, it may be supported

that discount does not create negative effects on consumers’ perception in luxury

market as long as the brand could creates a dream (high level of desirability or

faithfulness), focuses on its historical (natural or imaginary) elements, provides a

distinctive experience (that stirs disparate senses on consumer perception in whole

shopping process) to its consumers. Thus, it may be supported that discounts bring

substantial financial success to the luxury brand in the long-term whilst satisfying


Page 64: Thesis

different types of customers’ expectations and gaining them as a future’s loyal

customers to the brand under the sight of their desire for exceptional and search for a

meaning. That’s why we have answered negatively to our research question which

concern ‘’Does discount create negative effect on consumer perception in luxury



This master thesis is a conceptual framework that provides unusual insights, including

several discount methods in the luxury market. Results that have been constituted

based on related literatures are going to be discussed in this part in the sight of our

research question. We have aimed to build a concept that will create long run success

to luxury brands and strengthen customer engagement between customers and brands.

Besides its efficacy to business, it might guide future researchers who concern about

discount strategies in the luxury market.

There may be some popular wisdom about historical concepts for traditional luxury

market; but as researchers, we should demonstrate the other dimensions or

possibilities to these concepts. The notion of luxury has been defined with solid lines

throughout its history. Such lines have indicated as inaccessible, extremely expensive,

exclusively distributed, rare, royal etc. But as the time passes, it is non ignorable to

update its requirements and some features to catch the advantage of the present time.

As we have done in this research, it should be accepted that traditional luxury has

transformed more than marketers think in many dimensions that will be discussed in

this chapter. As we mostly have defended in this research, it should be accepted that

the notion of luxury nowadays, has changed in many forms. As the time pass, many

things that could be seen as luxury in the past, now, are quite accessible by many

more people. When we turn back to very beginning of the 20th century, owning a

servant at home was something that is special only to the extremely rich people such

as royal people. But now, even middle-class people have their own cleaning ladies,

auxiliaries or life coaches at their home as a result of busy life. It may be seen that

owning a servant is a still luxury but it is quite affordable for many more people than

how it was in the past.

In case that we assume the traditional luxury;


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Along the wide-known figures, luxury is a dream world that is referred with peerless,

unique and impeccable world. Affirmatively, luxury should offer an experience with

high-level pleasure that has been called hedonism, over time. It means that the

pleasure from luxury should increase in direct proportion to its high value. It has to be

priced over its substitutes or comparable ones to protect brand exclusivity deservedly.

It should be attached with a unique history, even if a brand does not have a long-

lasting one, it might be created by luxury brand managers. History factor is an

inseparable whole to increase customer alacrity and also in perceived experience.

Through its specific notion, the visibility of luxury items must be limited at a certain

point to provide exclusivity via special distribution. Luxury brands should ensure that

they offer personalized service to customers such as calling someone by their first

names, home delivery etc. to make them feel special. In the sight of the concept of

luxury, it has to be timeless, valuable at any time. Luxury has to be something rare,

thus, brands try to put a certain level of inaccessibility to protect brand image. So,

they set higher prices than competitors in order to protect brand exclusivity. Not like

traditional marketing, luxury strategy does not focus on its market share, which may

generate a dilemma between accessibility and exclusivity.

In addition to the business side, many luxury consumers are ready to pay high

amounts of money to luxury items because of their desire to show their affordability

in the line with their wealth and also feel privileged and exclusive. Also, there is a

common belief that if an item is over-expensive, it has quite high quality as it is in

luxury market. That’s why high prices attract some consumers’ attention because of

these items’ high investment value or financial potential. But, this is valid for

unconscious customers in general. Customers, who have wealth and also snob appeal,

may prefer to buy a product because of its overpriced etiquette without caring about

the brand name, its unique history, value judgments and qualifications. It means that if

a customer is not conscious of a product and its components, which is under a luxury

brand, he or she can perceive the product as high quality. But, for most-known brands,

this generalization might be wrong statement such as Louis Vuitton, which is beyond

arguments about its quality whether the brand sets its items as lower ranges. This

show us again the inadequacy of price level in luxury market when we take into

account the most loyal luxury market customers. Luxury is a dream and as many

hardly accessible things in the world, luxury always should have above average prices

but different aspects and alterations cannot be ignored easily.


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In luxury market, many urban people prefer to explain themselves by their appearance

that includes luxury cars, houses, clothes etc. They may think it is easier way to prove

that they have high power and wealth. This is another reason behind the questions of

the growth of luxury market day by day. But this is not a generalizable statement

because of its materialistic approach. This kind of luxury customers, especially the

ones who have mostly snob appeal, believes that they gain prestige, self-assertiveness,

preeminence, and dominion with their over-priced purchasing. Thanks to their

satisfaction’s temporariness, they continue to buy regularly. This is another reason of

the irrepressible growth of the luxury market.

Brands promotion strategies also do not aim to sell more as the others do while they

are implementing different promotional tools for FMCG goods. For instance, the aim

of Rolex is that to make those who have the means to buy a Rolex happy that others,

who do not have the means to do so, know what Rolex means. To protect this idea,

generally, it is suggested not to endorse any celebrities in luxury brands’ advertising

and any price tags in their promotion channels. As it has been taught to all marketing

students, it should be remembered that luxury marketing is completely different than

traditional marketing approaches even if traditional luxury sometimes address other

aspects as we have supported. Someone should forget about the 4p of demand

marketing; product, price, promotion and place. Marketing mix defends that a product

should meet customer needs, price states its value, place states easy product access

and promotion uses advertising channels, to inform, increase awareness and attract

customers to buy the product. As it can be understood from this defend, marketing

mix is far away notion than luxury marketing in every aspect. Also, a luxury product

or service should contain something handcrafted. It has to be kind of art, creation and

grace. This differentiates luxury’s exclusiveness and specialty from mass-produced

goods by delicateness and also adds value to luxury brands. To catch the certain level

of technical quality, nowadays, so many brands cannot produce their products by

human hand but at least they include some parts, which make the product more

valuable and specific. Sometimes the terms of ‘hand-crafted’ is used as a promotion

tool in luxury. Even an item includes a fractional part, which is handcrafted; it

increases the item’s etiquette value to make more money.

Distribution is another specific issue in luxury market because of its sacred nature

which should provide relatively inaccessibility and different from its equivalents. For

instance, if you are Louis Vuitton or Channel and if your purpose is ‘made in France’,


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it is impossible for you to manufacture your items in Thailand or in China. Here, the

main idea is that your distribution channel or way protects you from your competitors.

If we go further with Louis Vuitton example, the brand, as a first time in the history,

has decided to sell its products only in its stores. They have shown that the important

thing is Louis Vuitton brand and it is not comparable with the other luxury products.

According to this idea, when a customer decides to enter a LV store, he or she has

already chosen the brand in the midst of hundreds of luxury brands. It can be

supported that it is a costly strategy to manage but we see an enormous success

behind LV’s strategy. This essential of luxury also explains the high prices in the

luxury market.

These approaches may be seen as far away from discount applications because of

their solid lines of traditional luxury, but our main idea is to show that there are

profitable and successful discount ways while luxury brands are respecting the nature

of luxury and maintaining the exclusivity. These traditional views about the luxury

cannot be ignored even though we have focused mainly on accessible, lower-priced or

discounted luxury items or services. This is because luxury brands, in one way or in

another, should consider and respect these approaches to protect their luxury status in

long-term. If luxury brands do not add these special features of luxury to their product

lines, they would be in danger of loosing their core structure that is in line with the

concept of luxury. These common statements about luxury market can be explained at

great length but as our main concern, we go through new type of ‘accessible’ luxury.

In case that we assume today’s luxury;

Even luxury brands’ strengths significantly come from their pricing power, we all

know that there may have been price-discounts, end of model year reductions in price,

purchase of previously used items, online flash selling or even knock off branding.

Some marketers argue that if a luxury brands implement one of these, they will leave

the notion of luxury and they will jump into fashion or upper-premium brands. But it

is quite arguable to claim that Gucci or Dolce Gabbana are not luxury brands because

of their end of model year reductions in price. End of model year reductions for

instance, provides luxury brands to turn into cash what they have remained on their

hands that are irrefutable by any brands. On the other hand, there are some luxury

brands that still do not implement any kind of discounts to their items or services and

maintain their success in the long term such as Louis Vuitton. Thus, it might be said

that different strategies can be selected and implemented with regarding to many


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various approaches by luxury managers and it has to be considered with their long-

term results.

For a fact that the value of luxury’s timeless or price setting, when Christian Dior

reduced the price of a watch from 12.000 EUR to 6.000 EUR, majority of the

customers have justified that ‘Dior remains Dior’ in a survey. They thought that Dior

products are not luxury just because of their high prices and the products remain same

with the same amount of work, craftsmanship and service too. Finally, they have

added that the discounted price was still expensive to say that it is not a luxury

product. According to customers’ discourse, it might be said that even though

luxury’s monetary component is quite significant when to assess it, it’s not the only

dimension that provides a judgment about a luxury brand. Furthermore, in luxury

market, we cannot easily ignore discount strategies that brings financial and

incorporeal success to luxury brands when they are implemented in accordance with

the definition of luxury and in a proper way that is in line with the core business of the

luxury brand. Even if you implement some discount strategies to luxury goods, it does

not mean that a luxury brand tries to increase its market share. This would be the last

purpose on this implementation.

In addition to business requirements, there are some customer-oriented reasons that

explain the transformation of luxury on the road to new type of ‘accessible’ luxury.

Marketers cannot look at only one type of customers and cannot set their strategies

from one side of business. As luxury brand marketers, we do not have to address

everyone, as we have to do this in consumer market with the requests of traditional

marketing. But, we have to fulfill our current and potential customers’ requests to

satisfy them and create an emotional experience with them and to create high status

luxury brands. It should not be forgotten that everyone has special requests from

luxury brands nowadays and every special needs has to be fulfilled by different

implementations. If a brand understands its consumers’ perception about luxury,

company may set their pricing strategies or they can decide whether to do discount or

not. But; marketers should understand that every over-expensive item cannot be

accepted as luxury product. Price is only one dimension that associates with luxury

because of its dignity. However, we cannot accept H&M as luxury brands because of

its collection with Karl Lagerfeld to gain competitive advantage over its rivals. To

better understanding, we can say that luxury is qualitative, not quantitative and

hedonism takes precedence over functionality. For instance, number of diamond on a


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necklace may represent its opulence but it does not say anything about the taste of a


People now hunt for value, desire for exceptional and search for a meaning.

According to their motives such as occupational prestige, status insecurity, status

consumption, value consciousness, man-woman relationships etc. some of them may

prefer accessible lines of luxury while the others may prefer to own the top of the

product range because of their belief that is about luxury items represent them as more

powerful, esteemed and successful. These social antecedents are significant for

marketers when they set their pricing strategies. If they do not take customers’ special

requirements or approaches in luxury market, they cannot fulfill their customers’

conspicuous and exclusive needs that are the reasons they choose luxury brands.

Luxury brands’ managers need to compose some product lines- generally more

accessible- to address different customer groups before they go through discount


Also, people who have low power try to complete their missing parts with these

unique and scarce items to raise their status in the society. The reasons of consumers,

who buy luxury products, were the increase in participants’ willingness to pay is a

function of their belief that owning the product would provide them with a sense of

power. For instance, in an office, if a manager wants to show himself with more

powerful as his boss, he may think that he restores his sense of power when he

acquires high status product such as %100 Kashmir Burberry trench coats. To sum

up; we can say that the powerless are not likely to sit passively but desire to spend by

and by to acquire their missing sense of power. But when these people do no have

enough budget, entry-line products or cheaper line products which generally have

bigger logos on items, more conspicuous that may be realized more easily, will help

them to feel more powerful in their business life. However, if they do choose a high

status item, those have higher occupational prestige become more likely to choose the

authentic brand relative to the counterfeit brand. It means that if a person who has

high status and prestigious, prefers authentic items with quiet logos that can be

recognized only by loyal luxury brand customers. People with value conscious think

about price/performance ratio even if it is a luxury item. For instance, consumers who

are value conscious may choose to shop at luxury outlet stores and/or purchase things

on sale in order to get a better deal on a desired product. For these customers, as value

consciousness increases, the likelihood that a counterfeit luxury brand will be chosen


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increases more than the likelihood of purchasing an authentic luxury brand. Thus,

marketers should address value conscious customers by offering cheaper product lines

to avoid them buying counterfeit products. It should already be kept in mind that the

most unique items generally that are mainly handcrafted, have quiet logos and rare

materials do not goes on sale. Luxury marketers pay attention to sustain these kinds of

items exclusiveness and these items has already been sold as soon as they have taken

their place in luxury stores.

If we turn back to our research question that examines the discount effects on

consumers’ perception and with the idea that is related to accessible or lowered price

luxury items, we may see many different examples from our daily life. As we have

seen from different years’ the most powerful luxury brands, some of them are not

profitable at all such as Rolly-Royce. In addition, Gucci and Louis Vuitton have

decreased the amount of their entry-level products to sustain their long term power

and thus exclusivity; but unfortunately, they have missed the chance to compete with

the accessible luxury brands such as Michael Kors or Marc Jacobs. While Gucci and

Louis Vuitton blame recede into background on their upmarket drive they argue will

help them regain some of their lost glory, there is growing evidence that they are

losing out to newer, more affordable luxury brands. Even though these luxury brands

have affordable price tags, they have not hesitated to do some season-end discounts to

attract more attention. Thus, at the beginning of every season, they have offered new

designs that satisfy customers’ expectations.

These new luxury brands have known perfectly that they should do something

different than the essential luxury brands apart from the way of creation. They have

focused on new trends that will attract especially young people via affordable prices

and good styling such as using social media, developing creating new store concepts,

new product lines, offering online flash selling etc. Because of several years spent on

the industry, essential or traditional luxury brands have a deep-seated style that has

been created on good hands and their creations are almost non-negotiable for a new

luxury brand that tries to find a place in the market.

They have built their brands in quite clever ways such as Tory Burch, Coach, Michael

Kors, Jimmy Choo etc. Many of them have built a history which may be created or

originally explained, an experience that makes a brand something unique and a dream

factor that explains high desirability even if these brands’ items are not extremely

expensive. To emphasize on affordability but also to take a place in luxury market,


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they have set pricing strategies really carefully; be cheaper but do not get close to the


To sum up; the road to our concept,

In our results, he have shown that luxury brands may offer lower prices for entry-level

products that are usually the cheapest items in a brand’s product range and includes

accessories, fragrances and affordable items for everyday use. With this cheaper line,

a brand would mainly address excursionists, day-trippers and young customers who

have generally low budget and value conscious but have a probability to be loyal

customer in the future, to create emotional engagement with them. And also, it may

prevent their tendency to purchase counterfeit items. In addition, an item that has a

lower price tag may be more worthy in the future, as the brand gets valuable. This is

inevitable truth for many big luxury brands. Many luxury customers nowadays, turn

back to the history and try to conquer these so called vintage luxury items from

Internet, antique dealers etc. This implementation does not create negative perception

on loyal consumers’ minds because of their different areas of interest. It should be

kept in mind that the different customers who have desires for different requirements

and needs, do not care about the other social groups attitudes that they are not

involved. For instance, a Ferrari customer who have a huge passion to the brand,

have a desire to add many Ferrari cars to his collection, often visits the plant of

Ferrari, would not care about a teenager who have a Ferrari key chains that is sold at

quite affordable price as an entry-level product. As he have stated this before with

another example, different customers special expectations and ways of satisfaction are

quite different from the other group of people in luxury market. In the sight of our

research question, different types of products such as classical luxury items,

accessible super-premium, old luxury brands extensions etc. are positioned differently

in the brand universe and all of them have their own follower without caring the

others. A very loyal customer from one of the most precious luxury brand would not

care about discounted items, entry-level products or people who prefer to buy these

items from the same brand. Mostly, they do not compare themselves with others have,

even if they would compare themselves with other people, this would happen in the

same class of people who have similar wealth and life style. Also, most of the loyal

customers believe that if they would own the product at the beginning of the season,

they do not care about the other people when they own the same item at the end of the

season or in the next terms. As loyal luxury customers who generally prefer


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inaccessible lines with more exclusive and rare dimensions do not care about them,

these low-power customers also do not compare themselves with extremely high

wealth customers. For the luxury brands, realizing this difference is significant

because of the idea stays their behind that fights with discount strategies in luxury

market. Thus, we may defend that there would be no negative effects of discounts in

customers’ minds. To substantiate different customers’ dream, marketers always need

to seek to increase their brand loyalty even if they plan to target different customer

types while implementing discounts.

On the point of our results, we have shown to build a new brand whose items exit

from the same factory or from the similar designers with an existing and essential

luxury brand, while promoting this new brand with the existing brand’s reputation and

offering more accessible items than this. Herewith this implementation, the existing

brand would provide its exclusiveness without lowering its average etiquette and also

would satisfy its consumers while fulfilling their expectations with good design and

high quality under another prestigious brand name.

According to our results, luxury brand may offer lower-priced items or implements

substantial discounts via creating different product lines via brand or line extensions

to increase their brand universe and its awareness without creating negative effect on

consumer perception. As we have stated before, new luxury does not target only the

most wealth people of the society. Line extension means enlarging the product

portfolio in the core business with second, third or even more lines that offer a lower

price point and get closer to more people such as Dolce Gabbana and Armani have

done before. Brand extension means enlarge the product portfolio out of the core

business with several lines which offers customers to enter the brand’s world through

many different new ways with more affordable prices such as, Ferrari’s leather

accessories or Gucci’s café in the Galleria Vittorio Emanuele II which is one of the

world's oldest shopping malls located in Milan. These extensions’ main aim is to

create emotional engagement between the brand and their customers to create a

successful business in the long term. Luxury brands should be careful before they go

through these extensions because of the importance of relevance between different

lines under the same brand. As they try to create more accessible and discounted

product line, they need to be sure that they sustain their essential brand image, kind of

exclusivity and high quality. Otherwise, they would damage luxury brand’s image on

their customers’ minds.


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In the sight of our results, we have shown that luxury brands may offer customized

discounts to their most loyal customers to increase their pleasure from their

purchasing experience. In consistent with our highlight, consumers hereafter have

desire for exceptional and search for a meaning. Thus, increasing personal

communication and establishing a link would provide long run commitment between

the brand and the customer. However, luxury brand managers and especially store

managers should ensure to show this discount as a legitimate act and personal

concession because of customer’s prolonged shopping and cannot be offered to

anyone else.

To respond to the new trends, we have shown the significance of online platforms and

indicated successful financial results while offering discounts. Online flash selling

also has been used by many luxury brands to destock their season-end items without

reselling them in the next season and also to preserve their elegance and sophisticated

store atmosphere that should not focus on price tags or discount announcements.

When we examine discount effects on consumers’ perceptions in luxury market, it

should be mentioned the digital platforms because of its nature that evokes the

cheapness and accessibility but concurrently when it’s used properly, this evocation

can be transformed and exploited in accordance with the spirit of a luxury brand.

These websites of luxury brands whether they make online selling or not, should

reflect the store concept’s spirit which tells a story about attitude of the brand and also

should provide a real store experience with gracefulness.

(See Figure xi)

Thus, it may be said that web 2.0 has provided many advantages to luxury market

while the brands are offering up to 70% discounts to their products. Because of its

opportunity to provide avant-garde, informative and customer oriented surface and

usage, these websites have offered customized communication by calling people with

their names as brands have done it in the stores. When it is used properly, these digital

platforms are quite related with the nature of luxury even though it is accessible by

everyone; luxury brands may use special software on their webpages that enables

communications such as question and answer part for just their customers without the

participation of day-trippers or pretenders. Also, thanks to their massive contents,

which offer visibility of items in every aspect and in any colors, customers have

experienced luxury purchasing from their homes such as viewing a product catalogue.

Luxury brands generally have preferred to take a place on these online flash selling


Page 74: Thesis

websites for a certain limited time and with a limited number of products to maintain

their prestige, exclusivity and non priced focused approach. This image also made

customers to feel special because of the feeling that to obtain something rare, even if

they have not purchased from the brand store and even if they have paid less. As we

have stated before, the reason behind these purchasing are generally the idea that

they’ve made a good investment. Additionally, the design of the page and the

atmosphere of the website has to ensure that they provide a certain level of quality

that are purified from third party ads and other detractive announcements. When we

turn back to our research question, discount effects does not create any negative

perception in customers’ mind, when they’re implemented in accordance with the

exclusive nature of luxury. An impression like falling through the floor would irritate

customers and may be a reason to abandon purchasing from a brand.

In our results, we have shown the successful effects of pop-up stores and their

applicability to luxury brands opportunely. Pop-up stores remain open only for a brief

period and their concept owner creates an event, attracts the interest of media and

arouses the curiosity of consumers. These special stores are located generally much

closer to luxury brand’s main store in a city center. This store is compatible with the

idea of main stores and pop-up stores are somehow substitute to each other’s. It can

be interpreted like a customer who even cannot dream about an inaccessible luxury,

get the chance to touch this luxury at the streets. Luxury brands have understood that

there is a huge interest on luxury items and it is increasingly continuing. They are

trying to increase their brand awareness and also take an advantage of the riches of

future by satisfying them intimately. Additionally, it can be advised to luxury

marketers that these pop-up stores must be opened for a limited duration because of

its friendly, easily accessible, middle-class novice spirit that are some how far away

concepts from traditional luxury. With pop-up stores, you move something perceived

as ‘myth’ towards easily accessible and you make the dreams come true. But it might

be dangerous in long term according to rigid rules of luxury strategy. Thus, this

emotional shopping experience must stay as an amusing memory in customers’

minds. Before luxury managers plan this implementation, they need to be sure that

they have delicately balanced the trendy concepts that are related with the accessible

luxury and the notions of traditional luxury.

In the sight of our literature base, we have conducted a conceptual framework in line

with discount effects on consumer perception in luxury market while bearing


Page 75: Thesis

democratization of luxury in mind. Democratization means the action of making

something accessible to everyone (Oxford Dictionary), which is frequently used

nowadays in luxury market because of the disinflation of travel supply and the

continued downward pressure on prices has served to ‘democratize’ travel, and in

some senses this has democratized ‘luxury’. For instance, if we would think about

travelling to Maldives, Seychelles or Zanzibar, it might have seen as an unaffordable

holiday package by many people but nowadays, many young adults may fly to these

islands with a backpack easily. As we have mentioned before, this accessible form of

luxury has created an emotional engagement with luxury brands by many young

people who potentially will have higher income in their future and will have loyal

customers of these luxury brands.

Democratization has affected business world in many ways for both supply and

demand side. It has brought the accessible and abundant notions to the luxury and

thus discounts or low-priced items while it was an impossible implementation in

luxury’s history. Now, middle-class people can purchase items from luxury brands

because of the ‘everyone deserves it and everyone can afford it’ motto. It can be

interpreted as the boundaries between people who are in different classes, have

became closer to each other. Also, traditional luxury customers do not have a negative

perception about these tendencies because of keeping themselves in a different

position with different lifestyle. Under the light of our research question, this new

development can be interpreted as luxury brands may go through discounts or price

reductions in their product or service lines without creating negative effects on their

customers’ perception but it should not be general implementation to the brand. It

means that brands should be certain that these discount are for a limited time and for a

limited amount of products. Otherwise, a luxury brand might be called as premium or

upper premium brand and this would destroy both brands image and customers’


As we have shown before, luxury is more oriented toward experience rather than

purely conspicuous consumption nowadays and consumers mostly search for

emotional benefits. So, pop-up stores and online flash selling websites can be

represented as new blood in luxury market. As old examples have shown us these

strategies have been interiorized by many luxury houses and they have gained



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Whatever luxury brands do about discounts to satisfy their customers, they should

respect the notion of luxury and its characteristics. They should not cheapening the

exclusive and elegant luxury world. For instance, in recession times, they should not

lower the prices to target more people who cannot be aimed by luxury brands or they

should not endorse celebrities in their ads to attract attention of millions of people,

which cannot be imagined by any luxury managers. Additionally, the way of doing

discounts is significant to maintain the image of a luxury brand. On a store display,

you are not allowed to scream your SALE with big font size because of its bored and

regretful meaning. Luxury should always stay strong in its powerful and exclusive

environment. As long as luxury brands have a consistent brand strategy in their

marketing channels, positioning strategies and a history between different segment

products, company would exploit the chance of different needs and demands of

customers under the light of our research question that assesses different possible

discount strategies for luxury brands.

Airline industry is a good way to understand the difference between today and the

past. Some years ago, flying from Europe to the United States was extremely

expensive and it was somehow luxury but now thanks to our global world we have

many alternatives and thus different price ranges accordance with everyone’s budget.

When we get a better price offer from a leading airline company, as a customer, we

get happy in general and it does not create any negative impression in consumers

mind as long as we fly with the same aircraft and get the same high quality service

with the same standards. It should be forgotten when we have defined the ways of

discount in the luxury market, we have always added the notion of new luxury or

accessible luxury. Because of its unique nature, in luxury there are some points or

parts of the brands that should not be touched as the price. (Etc. It is unimaginable

that Hermés Kelly bag goes on sale which is produced only limited amounts for a very

few customers who wait for months on waiting lists of the brand.)

After all, we can say that there is no negative effect of discounts on consumers’

perception in luxury market but this statement can be accepted when luxury strategy’s

main principles are implemented and respected. Democratization of luxury and

luxurification of society do not mean that luxury strategy looses its exclusive nature

and turn into mass market. Democratization of luxury is a natural transformation that

gives everyone a chance of owning luxury brands’ items but in accordance with their

budget. For instance, as a relatively low-budget customer, you may purchase a LV


Page 77: Thesis

passport case or wallet for 200€ but you cannot buy The LV ALMA bag at lower


(See Figure x)

If the biggest luxury brands on high potential occasions would make partly concession

about their myth that is completely against to discounts, they would increase their


These evolvements show us that luxury brands, even though they have centuries of

history and strong glory, should be open to new trends and try to exploit them because

of its profitability and the probability to improve customer relationships. To play a

part in the luxury market, nowadays, many luxury brands have realized that the

amount of high sales do not provide success in the long term. Many of them know

that they should go through their customers’ expectations and adapt new trends in the

luxury world to be profitable in this competitive environment.

Limitation and Assumptions

The main purpose of this thesis is that gathering all the related information and

externalizing this information concerning with our research question for future

researchers and humbly, for luxury brand managers. We have aimed to provide in-

depth insights and understanding about discount issue in luxury market. The reason

behind not to employ any kind of interviews and pilot surveys in this thesis is our

willingness to provide an encyclopedic information without previous subjective

thoughts about the people in the luxury market. It should be noted that the results of

this thesis under the light of the literature review are tentative and it may be followed

by further exploratory or conclusive research and finally these results establish

priorities for future research. After these implications, future researchers and also

marketers in the market would be more confident under the light of our research


Most of our literature bases do not cover Far East market that has different business

structures, life styles and customer habits than Europe and United States. Thus, it may

be advised to future researcher to take differently located people into consideration

when they compose their samples. Because of the extreme population of China,

Indonesia, Japan etc. most of European luxury houses have opened their luxury stores


Page 78: Thesis

also in Far East and in South America and they have reached a huge success in these

countries. Thus, it may be said that there is a literally ignorable population in these

countries to make a research about luxury market.

When luxury market is assessed under the light of existing literature, it may be seen

that social and interpersonal motives manage luxury-related researches in comparison

with personal attitudes. It is needed to build a comprehensive model that contains all

significant elements -psychological and functional- that affects consumers’’

perceptions. Putting all related luxury value dimensions together while empirical

researches has been attaining, that affect consumers’ perceptions and luxury

purchasing habits, would provide more confidential results to further research for our

research question.

This research must be perceived as an instructive source that guide future researchers

in luxury market and its different approaches that are related to discount strategies and

also other pricing opportunities. It is suggested to go through the conclusive research,

which includes empirical data to provide clearer insights and more demonstrable

results on our subject. Additionally to surveys and experiments, future researchers

might do interviews with different experts from different industries in their conclusive

researches as a qualified data.

Managerial Implications

In luxury business, marketers need to take actions at the right time and in a proper

way when they set their pricing strategies. Because of luxury’s sensitive structure to

fluctuating implications on both customers’ minds and in brands’ value, managers

need to be sure before they go through the discount implications. Luxury market stays

far away than the FMCG (fast-moving consumer good) market. This market’s

customers expect from the brand more, care about the attitude and position of the

brand more, and certainly they pay more than FMCG customers do. It shows that

managers, who work for luxury brands, should spend so much effort before they

consider actions through the discount whatever their purpose is.

As it has been stated in our results, there are several ways to implement discounts in

luxury market, without destroying the brand image and without creating negative

image on consumers’ perception while creating financial success at the end of these


Page 79: Thesis

implications in the long term as it has been expressed also in a concept at the end of

results section.

According to our literature base, luxury brands may apply accessible prices to their

entry-level product ranges, which include accessories, fragrances and subsidiary

products. For managers, the most important part is determining the content of these

products and their price range. Luxury brands should keep this entry-level range in a

limited amount and without sacrificing high quality. Otherwise, this implication

would be seen as an ordinary price policy for the brand, which is completely against

luxury’s exclusiveness and would be perceived as a FMCG. To give an idea, a luxury

brand should keep its entry-level product line up to 10% of total products.

When it comes to discount strategies in business, it would evoke Internet and online

selling first. Because of the terms of Internet, it reminds people 24/7 accessibility,

comparable prices & products and at the end the cheapest prices to be found. But in

luxury market, it cannot be seen in the same way by managers. Even if luxury brands

use many social media platforms and they care about their brand’s websites more than

ever before, digital platforms should be used different than FMCG market. The

exclusiveness, elegance and sophistication of a luxury brand should be respected on

every kind of platforms. Brands should be rigorous on the content of their websites

that must include the professional photography with high-resolution display,

elaborated description of the products, qualified and highly consistent structure with

the brand image. Brands should not even try to promote and strike their products with

their prices customers’ eyes. According to our literature bases, some authors have

suggested not to include the price tags on a luxury brand’s website under the idea of

the importance of visiting a luxury house physically to talk about the details between

a salesperson and a customer. At this point, it can be supported that Internet may be

explored by luxury brands while using it as a showcase or a product catalogue as a

reflection of a luxury store concept. Also, in luxury market, Internet may be used as

an online selling tool to generate cash from the old season’s products and also from

some entry-level products for people who do not have the luxury store in their

residential area. But this online selling process should continue only for a limited

period both to increase the competition between customers and to preserve the brand

image. Luxury brand managers should be sure that they sustain 7/24 full services on

Internet to their customers to make them feel exclusive even if they are not the most

loyal customers to their brand.


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When we take base as our literature review, we have found different types of

customers who have different expectations and have different shopping habits in

luxury market. Managers need to evaluate all kinds of customers to serve them

efficiently, to create a successful business and to bridge strong customer engagement.

As it has been stated before, there are some value-conscious customers who seek for

higher price/performance ratio in luxury market. Managers set some middle class

products among their luxury product range to attract attention of this kind of

customers. Also there are some conformists customers who have a thrifty attitude

when they are shopping and even if they seek for high status, with luxury products,

they do not want to spend a lot of money for an item. This kind of customers

generally does not have a snob appealing as many luxury customers have. Finally,

poseurs should be mentioned to flash luxury market managers to create a long-term

success in the market. Even though they cannot create much profit in brands’ profit

share, managers may exploit these customers’ spending to create an emotional

engagement with them who have limited budget but seek for high status or try to

pretend as a wealthy person. These people are generally young adults and managers

should consider that they are potentially future’s customers who will have higher

budget in the future. Thus, a luxury brand may offer limited amount of lower-priced

items to attract these customers. All of these customer types in luxury market should

be considered carefully when managers implement price cuts and discount strategies.

These implementations should not disturb the loyal customers of a luxury brand not

just because of the probability of loosing them, also to protect the brand image and

sustain a certain level of exclusivity.

In any market, customers like to feel special and want personal attention while they

are paying some amount of money from their not never-ending budget. But, when it

comes to luxury market, customization or personalization of offerings gain much

more importance than traditional consumer market, because of the existence of many

reasons behind their choice of a luxury brand. This is highly competitive market and

customers sometimes pay excessive money to the luxury items or services. Thus, their

expectations from these brands may be sometimes surprisingly high. Luxury

salespeople or managers need to serve as a life coach to their customers during and

after their shopping experiences. They should make customers feel special, exclusive

and something to be remembered at any time. Related with our research question that

is ‘Does discount create negative effects in consumer’s perception in luxury market?’


Page 81: Thesis

luxury managers should consider customized discounts or special offers to their loyal

customers. This attitude would feel customers more aligned to the brand and they

would appreciate this behavior in their further shopping. Many essential luxury

houses have been built customer engagement with customization. At this point,

majority of the responsibility is held by salespeople because of the necessity of their

hard effort to take notes of their loyal customers’ special dates such as wedding

anniversary, birthdays etc. The most significant part in this is that respecting personal

information and keeping these discounts in private. Thus, you would not be


Luxury brands may offer lower-priced products via creating different product lines

(line or brand extensions) for value conscious, price sensitive, day-tripper and

excursionist customers to strengthen customer engagement and to make profit in long

term. With these lower-priced product categories, luxury brand may sell various

offers to their ‘new’ customers who have a probability to be future’s loyal customers.

Managers need to be careful when they extend their product categories because of the

need of to be in-line with the main product category. If you would go beyond the

ordinary of the luxury brand, your current customers’ perception can be effected

negatively and the brand would be understood as non-luxury. However, it should not

be considered that a brand’s new line should be consistent with the DNA of the brand

and respect its history. Brand managers should emphasize its desirous specifications

and create a meaningful experience for consumers.

According to our literature base, another discount or lower-price offers may be

represented in pop-up stores that have already built by many essential luxury houses.

Even though these stores stay against the ‘inaccessibility of luxury’, they should stay

in line with the concept of luxury in terms of elegance and sophistication of the store

atmosphere and respect the core business of the luxury brands. Managers need to

decide the location of the pop-up store, the selection of the products that may be sold

in that stores.

When every discount implementation ways have been put altogether under the light of

our selected literature bases, managers would see the difference between the

traditional luxury and the new luxury that has more flexible structure, accessible lines,

open-minded attitude to many people. This new term of luxury has occurred because

of the luxurification of the society and democratization of the luxury. As researchers,

our suggestion to luxury brand managers is to look at the broader framework and even


Page 82: Thesis

though the luxury strategy has more closed borders than traditional marketing,

managers should consider the changing customer expectations and needs in the luxury

market and fulfill their customers’ needs to create a successful business in the long




Page 83: Thesis

Regarding to our research question which is ’Does discount create negative effect in

consumer’s perception in luxury market?’ we have listed all possible discount

strategies and how or when they can be implemented to luxury fashion brands’

marketing strategies and in general terms, we have defended that discounts should not

be rejected from scratch, when it comes to luxury branding strategy. As we have

discussed in our results, luxury brands may go through line extensions, pop-up stores,

online selling, customized discounts, and accessible entry-level products to fulfill

different types of customers’ ambitions who have different expectations from these

luxury brands.

Even if there are some luxury fashion brands that do not implement these discount

strategies, they should not close the doors to different pricing strategies because of the

emergence of new customer expectations and different business needs in the long

term which cause us to answer negatively to our research question. It should be

accepted that luxury has changed and as of today, it is going through the customers

point of view, even we defend luxury’s targeting policy is different than traditional


As the entrance of especially New York based luxury brands into the market,

European fashion luxury houses have faced to lose their power on profits and also

their effect on entrenched customer group globally because of the existence of various

successful creations. When it comes right down to it is that even as the luxury market

gets financially better and better, it is going to have a variety of sub-layers in its

nature. Luxury companies will have to manage the complexity to a much than ever

before; to target new customer expectations accordance with price and product

categories, to use the Internet craftily, to create inviting stores, to respond to social

concerns and to sell a sense of tradition and they need to manage all these

implementations while continuing to create enthusiasm, uniqueness and a sense of



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Figure i: Luxury market value in billion EUR


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Figure ii: Signal preference and taxonomy based on wealth and need for status.

Figure iii: Quite and loud logos.


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Figure iv: Value-expressive vs. Social-adjustive ads comparison.

Figure v: Online discount luxury on GILT’s website.


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Figure vi: Semiotic representation of the lexical units continued in the definition

of the concept of luxury.

Figure vii: The circle of luxury profiles


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Figure viii: The conceptual model

Figure ix: The scope of the luxury goods and services industry


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Figure x: LV ALMA handbag, louisvuitton.com

Figure xi: http://www.rolls-roycemotorcars.com home page


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Figure xii: Michael Kors shoulder bag as CHF 299.48, michaelkors.com

Figure xiii: Gucci Jackie shoulder bag as CHF 5,610, Gucci.com