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RSM458H1 Final: Finals RSM458 Summary

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Department
Rotman Commerce
Course
RSM458H1
Professor
Tsai
Semester
Winter

Description
Week 5 Lecture El Bulli Creating brand experience: a magical experience constructed -pre-experience -experience -post-experience Managing brand experience: creativity and innovation can be institutionalized -standardize innovation process -may not need to (or even want to) listen to customers to understand customer experience Listening to customers vs. understanding customers: the chef is the professional so he knows what customers want during innovation phase, but also collect feedback after the experience. When profitability clashes with brand strategy -need to consider how improvements can change brand experience Brand Crisis Management 1. Plan: pre-planned set of guidelines 2. Acknowledge the problem and apologize 3. Get outside help 4. Inform and update customers/communities Straight and soon, flood the zone, good bad and ugly, distill and simplicity, repeat 5. Monitor then respond Samsung Note 7 Crisis: brand insulation effect and national support means Samsung won’t be hurt in the long run but can improve on informing and updating and get channel support. Readings Volkswagen and the end of the Corporate Spin The most admired organizations don’t do “spin;” the old world of corporate secrets is over and organizations are still trying to catch up to this reality. There are complex social, political, and technological reasons for this dramatic change. At the social level, two phenomena coincide. First, the decline of public trust in organizations and second, the marked decline in levels of deference to authority. The old practice of “covering up” no longer works. Spin backfires. The breadth and depth of information available today has created a more knowledgeable public, less easily swayed by public relations efforts. The default mode should be to share everything – only holding back that which is restricted by law or regulation. In this new environment, organizations and their leaders need what we call radical honesty. Leaders and managers must become compelling communicators, operating according to the following general guidelines: • Straight and soon. Get the story out honestly and quickly – always assume you have less time than you think. • Flood the zone. Use many channels – you need to connect with different kinds of stakeholders, different generations, genders, cultural backgrounds, with different communication habits. • Good, bad, and ugly. Encourage honest conversations about both hopes and fears. Remember that power relationships sanitize information that gets to the top. Ensure people can bring bad news. • Distill and simplify. Keep communication simple and relevant, don’t drown people in irrelevant data. • Repeat. Find ways to reiterate the message and build feedback loops. Remember that trust builds slowly and quickly fades once the message stops, or when people see or hear contrary data. Week 6 Readings Luxury Brand Marketing- The Experience is Everything Introduction The marketing of luxury goods has become increasingly complex, being associated not only with conveying an image of quality, performance and authenticity, but also with attempting to sell an experience by relating it to the lifestyle constructs of consumers. The characteristics of luxury goods suggest that marketing within the sector is different from many other industries but despite these perceived differences, there is, however, evidence to suggest that marketing in the luxury goods sector relies heavily on traditional marketing concepts. A New Luxury Paradigm Parameters of luxury Luxury and non-luxury goods can be conceptualised according to functional, experiential and interactional symbolic dimensions. Luxury has traditionally been associated with exclusivity, status and quality. 'New luxury' has been defined as 'products and services that possess higher levels of quality, taste, and aspiration than other goods in the category but are not so expensive as to be out of reach'. Within a broader context, observers have pointed to the trend of middle-market consumers trading up for products that meet their aspiration needs, referred to as the 'luxurification of society'. This trend appears to be evident within a global context. The result is that marketers within this sector need to redefine their strategies to reflect these changes. Consumption of luxury There is differentiation between non-personal- and personal-oriented perceptions. Non-personal-oriented perceptions refer to perceived conspicuousness, uniqueness and quality. Indeed, acquisitive luxury has been attributed to contemporary luxury consumption in emerging markets such as Russia and China. 'Motivated by a desire to impress others, with the ability to pay particularly high prices, this form of consumption is primarily concerned with the ostentatious display of wealth'. This was typified by the emergence of the so-called 'yuppie' lifestyle segment in British society. Contemporary consumers use consumption to make statements about themselves, to create identities and to develop a sense of belonging. Luxury goods are acquired for what they symbolise, which is argued to be consistent with personal-oriented perceptions. 'The expression of 'today's luxury' is about a celebration of personal creativity, expressiveness, intelligence, fluidity, and above all, meaning'. Luxury and Postmodernism Recent arguments have been sounded that aspects of contemporary luxury consumption have reflected the phenomenon of postmodernism. Postmodernism is essentially a western philosophy that 'refers to a break in thinking away from the modern, functional and rational' or as 'the evasion of the subconscious'. Within the broad context of marketing, it is generally acknowledged that consumption has become a defining feature of postmodern societies. In terms of experiential marketing, two aspects of the postmodern discourse are most relevant: hyper-reality and image. Hyper-reality refers to 'the blurring of distinction between the real and the unreal, in which the prefix 'hyper' signifies more real than real. When the real that is the environment, is no longer a given, but is reproduced by a simulated environment, it does not become unreal, but realer than real'. 'Hyper-reality engenders a general loss of the sense of authenticity. In postmodern society, people exist in a state where signs and images have become more important than what they stand for. The result is that consumers in contemporary society consume imagery, and do not focus on what the images represent or mean. In a new age, with new consumers, we need to shift away from a features-and-benefits approach, as advocated by traditional approaches to consumer experiences. One approach is experiential marketing viewing consumers as emotional beings concerned with achieving pleasurable experiences. The traditional product/service value proposition is no longer adequate for reaching consumers or creating significant differentiation. Businesses must facilitate the enhancement of a seamless total experience for consumers, which determine whether products or services maintain competitive edges. Experiential Luxury Marketing The experience economy Experiential marketing is about taking the essence of a product and amplifying it into a set of tangible, physical and interactive experiences that reinforce the offer. Experiential aspects of consumption: fantasies, feelings and fun. Increasingly, consumers are involved in the processes of both defining and creating value, and the co-created experience of consumers through the holistic brand value structure becomes the very basis of marketing. Dimensions of the luxury experience We think about experiences across two bi-polar constructs - customer participation and connection. We have adapted this framework, based on customer involvement and intensity, to identify four 'experiential zones', namely, Entertainment, Education, Escapist and Aesthetic. The term 'involvement' refers to the level of inter- activity between the supplier and the customer. Suppliers no longer create an experience and pass it to the customer; instead, the supplier and customer are interactively co-creating the experience. The term 'intensity' refers to the perception of the strength of feeling towards the interaction. Those experiences we think of as Entertainment, such as fashion shows at designer boutiques and upmarket department stores, usually involve a low degree of customer involvement and intensiveness. For instance, flagship Gucci and Chanel stores in Tokyo have added restaurants and bistros with marquee chefs. For luxury goods marketers, the key is, however, to apply a more holistic approach, that is, to incorporate entertainment into areas outside the immediate experience. Fendi's spectacular show staged on the Great Wall of China is, here, a compelling example. Activities in the Educational zone involve those where participants are more actively involved, but the level of intensiveness is still low. In this zone, participants acquire new skills or increase those they already have. Many luxury goods offerings include educational dimensions. For example, cruise ships often employ well- known authorities to provide semi-formal lectures about their itineraries. Escapist activities are those that involve a high degree of both involvement and intensiveness, and are clearly a central feature of much of luxury consumption. This is clearly evident within the luxury tourism and hospitality sector, characterised by the growth of specialised holiday offerings. Likewise, celebrity endorsements for luxury products and services can help to foster escapism via association. The Tiger Woods Dubai is a private residential community and resort that will include the world's 1st golf course designed by Tiger Woods. When the element of activity is reduced to a more passive involvement in nature, the event becomes Aesthetic. A high degree of intensiveness is clearly evident within this activity, but has little effect on its environment such as admiring the architectural or interior design of designer boutiques. Again, it is easy to conclude that much luxury goods activity is of an aesthetic nature, with consumers immersing themselves in the experience, but with little active participation. Strategies for experiential luxury marketing Academics and practitioners alike have developed frameworks to help formulate strategies for developing experiential branding strategies. Smith has put forward a six-step process: (1) Conduct a customer experience audit in order to assess and evaluate the current experience of the brand. (2) Create a brand platform that involves defining a clear brand-positioning statement. (3) Design the brand experience. This involves the alignment of the brand's people, processes and products against the brand proposition. (4) Communicate the brand internally and (5) externally. (6) Monitor performance in order to ensure that the brand is delivering against defined objectives. Likewise, the design and brand strategy consultancy Lippincott Mercer presented the following four principles of experience design: (1) Identifying key customer segments. The trend towards the so-called 'democratisation of luxury' has significantly changed luxury consumption patterns. The evaluation of customer data can help to identify the most profitable customer segments. This will ensure that the brand is connecting with the right target segment. (2) Develop a touchpoint chain and gauge those with the greatest impact. Touchpoints or interactions between the brand and the target are categorized according to the phases of pre-purchase, purchase and post-purchase. (3) Turn findings into project priorities. Some luxury brand touchpoints will be more relevant than others. For example, browsing is critical to the purchase decision-making process among female fashion shoppers in India. These so-called 'moments of truth' need to be aligned against 'takeaways' of the experience. (4) Implement and monitor. It is here essential that interactions are consistent with the desired brand experience. The use of new technologies has also aided the potential for experiential marketing. The Luxury Institute found that 88%of wealthy consumers cite a preference for using the internet to research a luxury services firm, and 38% prefer to purchase luxury goods online. The management consultancy, A.T. Kearney developed a 7Cs model to create a high-impact digital customer experience - content, customisation, customer care, communication, community, connectivity and convenience. Likewise, Constantinides identified functional factors (usability, interactivity), psychological factors (trust) and content factors (aesthetics and marketing mix) as the main building blocks of web experience. Conclusions and Implications The difference between traditional and experiential marketing can be highlighted in a number of ways. First, the focus is on customer experiences and lifestyles, which provide sensory, emotional, cognitive and relational values to the consumer. Second, there is a focus on creating synergies among meaning, perception, consumption and brand loyalty. Third, it is argued that customers are not rational decision-makers, but are rather driven by rationality and emotion. Finally, it is argued that experiential marketing requires a more diverse range of research methods in order to understand consumers. Innovative experience design will become an increasingly important component of luxury marketing. Managing the growth tradeoff: Challenges and opportunities in luxury branding 10 Defining Characteristics of Luxury Brands (1) Maintaining a premium image for luxury brands is crucial; controlling that image is thus a priority (2) Luxury branding typically involves the creation of many intangible brand associations and an aspirational image (3) All aspects of the marketing programme for luxury brands must be aligned to ensure quality products and services, and pleasurable purchase and consumption experiences (4) Brand elements aside from brand names - logos, symbols, packaging, signage and so on - can be important drivers of brand equity for luxury brands (5) Secondary associations from linked personalities, events, countries and other entities can be important drivers of brand equity for luxury brands (6) Luxury brands must carefully control distribution via a selective channel strategy (7) Luxury brands often employ a premium pricing strategy with strong quality cues and few discounts and markdowns (8) Brand architecture for luxury brands must be managed very carefully (9) Competition for luxury brands must be defined broadly, as they often compete with other luxury brands from other categories for discretionary consumer dollars (10) Luxury brands must legally protect all trademarks and aggressively combat counterfeits Managing growth Tradeoffs with Luxury Brands Marketers of luxury brands face some very challenging tradeoffs in their marketing that can often mean the difference between success and failure. Three of the more notable tradeoffs are as follows: 1. Exclusivity vs accessibility 2. Classic vs contemporary images 3. Acquisition vs retention There are a number of areas that luxury brand marketers must consider to address this 'growth tradeoff,' but two potentially critical areas deal with brand equity measurement and brand architecture Brand equity measurement To understand the nature of the growth trade-off and any problems it may pose, marketers of luxury brands must be extremely close to both existing and prospective customers to assess how relevant their brand equity is across diverse market segments. 1. Brand strength and stature BAV, there are five key components - or pillars - of brand equity: Differentiation, Energy, Relevance, Esteem, Knowledge (DREEK) Traditional luxury brands are rated very highly by consumers on differentiation and esteem, although due to their aspirational nature and mystique, they may not score nearly as high on relevance and knowledge. 2. Brand imagery Many kinds of intangibles can be linked to a brand, but four categories can be highlighted: User profiles is the type of person or organisation who uses the brand. Purchase and usage situations is under what conditions or situations the brand could or should be bought and used. Personality and values reflect the fact that a brand, like a person, can be characterised as being 'modern,' 'old-fashioned,' 'lively' or 'exotic.' History, heritage and experiences are associations with a brand's past and certain noteworthy events in its history. 3. Brand feelings The following are six important types of brand-building feelings: Warmth: Hallmark, Fun: Disney, Excitement: MTV, Security: AIG Insurance, Social approval: Mercedes, Self-respect: Tide-'doing the best things for the family' for many homemakers. The first three types of feelings are experiential and immediate, increasing in level of intensity. The latter three types of feelings are private and enduring, increasing in level of gravity, which luxury brands create more. An important distinction can be made within enduring feelings among inner-directed feelings such as a sense of security, comfort or self-assurance, outer-directed feelings such as social approval, or a combination of inner-directed and outer-directed feelings such as self-respect. 4. Brand expectations The following are three notable types of expectations: Could expectations - what could the makers of the luxury brand choose to do if they wanted to? Should expectations - all things considered, what should the makers of the luxury brand do? Will expectations - what do consumers think the luxury brand maker will actually do? Of concern is when the 'will' expectations lag too far behind the 'could' and especially the 'should' expectations. Brand architecture Vertical extensions can be especially tricky for luxury brands. In such cases, brand portfolios and brand hierarchies with appropriate sub-brands can be employed to minimise cannibalisation and dilution, and to optimise equity flows. Despite the problems inherent with vertical extensions, some luxury brand marketers have succeeded in extending their brands to enter new markets across a range of price points like Armani. When multiple brands are combined to form a sub-brand, each brand element can vary in the relative emphasis it receives in the combined brand. The prominence of a brand element refers to its relative visibility compared with other brand elements. For example, the prominence of a brand name element depends on several factors such as its order, size and appearance, and its semantic associations.The principle of prominence states that the relative prominence of brand elements affects perceptions of product distance and the type of image created for new products. In general, primary brand elements should be chosen to convey the main product positioning and points of difference. Secondary brand elements, on the other hand, are often chosen for a supporting role to convey a more restricted set of associations. A secondary brand element may also facilitate awareness eg. Razor by Motorola. Luxury brands can thus use brand design elements to 'dial up' or 'dial down' the parent or ma
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