The Evolution of Luxury: Brand Management of Luxury Brands, Old and New RayeCarol Cavender ...

253 Pages·2012·1.33 MB·English

The Evolution of Luxury: Brand Management of Luxury Brands, Old and New

RayeCarol Cavender

Dissertation submitted to the faculty of the Virginia Polytechnic Institute and State University in
partial fulfillment of the requirements for the degree of

Doctor of Philosophy
In
Apparel, Housing, and Resource Management

Doris H. Kincade, Chair
Julia O. Beamish
James E. Littlefield
Patricia J. Fisher

June 21, 2012
Blacksburg, Virginia

Key Words: Luxury, Brand Management, Case Analysis

Copyright 2012, RayeCarol Cavender
The Evolution of Luxury: Brand Management of Luxury Brands, Old and New

RayeCarol Cavender

ABSTRACT

This qualitative study contributed to the growing body of research in luxury brand
management by constructing a framework that can be utilized by luxury companies and
conglomerates to develop their business strategies. The purpose was to examine: (a) how the
chosen luxury firm is addressing the changing business environment of the luxury goods industry
and the changing consumer environment targeted by that industry, (b) how the firm is managing
growth trade-offs, and (c) how the firm is adapting its marketing orientations to become
consumer-centric and experiential. Six research questions guided the study, and data collection
and analysis took place in two parts. Methods for this study included and in-depth review of
literature, an exploration of the business environment, and a case study. The study concluded
with the formation of a brand management framework specific to the luxury goods industry.
Data collection and analysis included an in-depth exploration of the evolution of the
business environment of the luxury goods industry from the mid-1800s to the first decade of the
2000s, and a case study of the sample luxury goods company, Louis Vuitton. A historical review
was conducted beginning with the company’s inception in 1854 and continuing through the
formation of the LVMH conglomerate in 1987. Exploration of brand management successes and
failures helped identify information relevant to variables in selected business categories
(business environment, corporate environment, and marketing strategy). Analysis of the case
study resulted in the refinement of the four brand management variables: corporate, brand
management, trade-off, and strategic planning.
Environmental determinism and the zeitgeist were evidenced to be important factors that
shaped the business strategies of LVMH and its brands. Strategic planning and strategic
management response were identified as ongoing strategies that helped LVMH and its brands to
effectively address and respond to environmental changes. Both environmental determinism and
the zeitgeist and the use of strategic management response were incorporated into the luxury
brand management framework as overarching themes for explaining the influences and
responses for the four management indicators.
Acknowledgements

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

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Table of Contents
Acknowledgements……………………………………………………..…….…………………iii

Table of Contents……………..………………………………………………………………....iv

List of Figures………..……………………………………………………………..……….....viii

List of Tables………………………………………………………………………….…..….….ix

Chapter I. Introduction................................................................................................................1

Overview of the Luxury Goods Industry…………………………………..…..….1

Overview of Brand Management……………………………………….……..…..3

Strategic Planning…………………………………………………………………5

Statement of the Problem……………………..…………………………….….….8

Conceptual Framework…………….………………………………………....….10

Environmental Determinism…………………………….……………….10

Fashion Adoption Theory………………………………….………….…11

Model Development……………………….…………………………..…12

Purpose of the Study……………………………….…………………………….13

Chapter II. Review of Literature……….……..………………………………………….……16

An Overview of Branding………………………………………………………..16

Brand Concept…………………………………………………………...17

Brand Identity…………………..……………….……………………….19

Brand Personality……….………………….…………………….20

Brand Image……………………………..…………………….…22

Brand Awareness…………………….…………………………………..24

Brand Positioning………………………………………………………..25

Brand Loyalty……..……………………….…………………………….28
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Brand Equity…………….………..……………………………….……..31

Marketing the Luxury Goods Brand……………………………..…………..…..37

Motivations Related to Luxury Consumption…………………………....39

Experiential Marketing…………………………………………………..42

Managing Growth Trade-offs……….…………………………………...44

History of the Luxury Goods Brand…….…………………………………….…50

Worth and the Early Modern Designers:
The First Era of Modern Fashion…………………..…………..……..….51

The Designer as the Brand:
The Second Era of Modern Fashion……………………………………..56

The Rise of the Conglomerate:
The Third Era of Modern Fashion………….………..…….…….………60

Chapter III. Methods….……..…………………………………………………………………65

Sample…………………………….……………………..……….………………67

Validity and Reliability of Study………..….…..……………………………..…69

Validity………….……………………………………………………….70

Reliability………….….………………………………………………….71

Limitations……………….………………………………………………………73

Data Collection………..…………………………………………………………73

Data Analysis………………...………………………………………………......74

Chapter IV. Case Study…………………………..………………………..…………………...83

Corporate History of Louis Vuitton……………………………………………...84

Louis Vuitton…………….…….……………..………………………….84

George Vuitton…………………………………………………………...86

Gaston- Louis Vuitton................................................................................87
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Relaunch and International Growth……………………………….……..89

Louis Vuitton Möet-Hennessy Merger…………………………………..90

Brand Portfolio Following the Merger…………………………………..………94

Arnault’s Brand Strategy……………………….………………………..94

The Louis Vuitton Brand in the 1990s….…………..……….…………...95

Marc Jacobs and Ready-to-Wear…….…..………………….……….…..98

The LVMH Brand Portfolio in the 1990s………………….….….……...99

Acquisitions and Divestments in the LVMH Brand Portfolio……………..…...103

Dior Couture………………..……………………………………..……105

Watches and Jewelry……………………..……………..………………110

Perfume and Cosmetics……………………..………….………………116

Selective Retailing………………….…………….…………………….126

Fashion and Leather Goods……………..………………….…………..135

Failures within the Fashion and Leather Goods Group………...141

Successes in the Fashion and Leather Goods Group………..….145

Back-to-Basics for LVMH and Further Restructuring………....148

Successes with Fendi………………………………..….150

LVMH Fashion Group and its Successes………..……..153

Chapter V. Results…………………..……………………………………………………..….157

Overview of Changes in the Business Environment……………………..…….159

Successes and Failures of Corporate Variables………………..……..……..….163

Company History…………………..…………..……………….………166

Brand Portfolio………………………………….…………………..….168

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Financials………………………………………..………………….…..172

Successes and Failures of Brand Management Variables……………….……...175

Brand Management Strategies…………………………………….……176

Brand Identity…………………………..……………….…….…….….181

Marketing Vision……………………..…………….………….……….186

Successes and Failures of Growth Trade-Off Variables…..……………….…...189

Growth Trade-Offs………………………………………………....…..192

Brand Equity………………………………………………………..…..196

Brand Architecture………………….…………………………….…….198

Indicators of Successes and Failures in Strategic Planning…………………….201

Brand Sustainability………………………………….………………....202

Effective Response…………………………………..………………….206

Luxury Brand Management Framework……………………..………….……...211

Chapter VI. Summary, Conclusions, Implications, and Recommendations………………216

Summary…………………………………………….…………….……..….….216

Conclusions………………………………….……………….……..……….….218

Implications…………………………………………………………..…..….….222

Recommendations for Future Research…………………………………….…..224

References………………………………………………………………………..………….…225

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List of Figures
Figure 1. Brand Knowledge Model…………………..………………………………..……….23
Figure 2. Luxury Brand Management Framework…………………………………………......215

viii
List of Tables
Table 1. Variables, Operational Definitions, and Measurement for the Study of the
Business Environment of the Luxury Goods Industry…………………………………..…..77

Table 2. Variables, Operational Definitions, and Measurement for the Study of the
Corporate Environment…………………………………….………………….……...…..….78
Table 3. Variables, Operational Definitions, and Measurement for the Study of
Brand Management…………………………………………………………...…….………..79

Table 4. Variables, Operational Definitions, and Measurement for the Study of
Growth Trade-Offs………………………………………………………………………..….80
Table 5. Variables, Operational Definitions, and Measurement for the Study of
Strategic
Plans………………………………………………………………………………………….81

Table 6. Dior Couture- Holding Company for LVMH………………………….……………...106
Table 7. LVMH Watches and Jewelry Group Brand Portfolio…………………..………..…...111
Table 8. LVMH Perfume and Cosmetics Group Brand Portfolio…………..………………….117
Table 9. LVMH Selective Retailing Group Brand Portfolio……………………….…..………126
Table 10. LVMH Fashion and Leather Goods Group Brand Portfolio………………………...137
Table 11. Revised Variables, Operational Definitions, and Measurement as Results of the
Study of the Business Environment for Louis Vuitton and the LVMH Conglomerate….…161

Table 12. Revised Variables, Operational Definitions, and Measurement as Results for the Study
of the Corporate Environment for Louis Vuitton and the LVMH Conglomerate……….....165

Table 13. Revised Variables, Operational Definitions, and Measurement as Results for the Study
of Brand Management for Louis Vuitton and the LVMH Conglomerate…………..……..176

Table 14. Revised Variables, Operational Definitions, and Measurement as Results for the Study
of Growth Trade-Offs for Louis Vuitton and the LVMH Conglomerate…….…………….191

Table 15. Revised Variables, Operational Definitions, and Measurement as Results for the Study
of Strategic Plans for Louis Vuitton and the LVMH Conglomerate………………..……….…202

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Chapter I. Introduction

Park and Kincade (2011) reviewed the business environment of the general apparel
industry from 1973 to 2005 and identified three categories of influence: consumer, globalization,
and technology. They reported of increased globalization of the business environment and a
movement of the industry from a focus on automation and product quality control to outsourcing
and a focus on consumers. Indications from their research and other authors (e.g., American
Fabrics and Fashion, 1980) are that the apparel industry prior to the 1970s was focused on
production aspects of the industry and experienced limited change from earliest recorded history
to the later part of the 1900s. For example, increases in production were focused on fabric
production during the 1800s because home sewing was the norm for clothing production. During
the early parts of the 1900s the movement to ready-to-wear clothing and the increase in retailers
to sell these products changed home sewing to factory production, but the production aspect of
the business was still most important (Burns & Bryant, 1997). Park and Kincade note the growth
of the marketing aspect of the business starting in the 1970s and 1980s.
Overview of the Luxury Goods Industry
In general, the apparel industry shows little fragmentation of change by product type until
more recent history. The luxury goods industry, as a subset of the apparel industry, shows some
distinct changes in the more recent business environment for this industry. These recent changes
represent an unprecedented pattern of growth, averaging 14% growth in sales annually from
1996 to 2000, and overall growth in the first decade of the new millennium despite periods of
global recession (Bruce & Kratz, 2007). In addition, the cyclical nature of the luxury industry has
been especially evident during this time period as events in economic, social and political
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