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There exists a gap between expected service quality and perceived service quality.

In an attempt
to explain such gap, Parasuraman et al (1985), came up with a ‘gap model’ which is intended to
be used for analyzing sources of quality problems and help managers understand how service
quality can be improved. The model is illustrated in figure 3.

1 Luxury market in China According to the World Wealth Report (2008) made by Merrill Lynch and Capgemini the number of „High Net worth Individuals‟ (HNWI) has grown tremendously in newly emerging economies. the execution of the service express) occurs. Management perceptions of customer expectations guide decisions regarding service quality specifications to be followed by the company when service delivery (i. The service experienced.Firstly. China has about 250 million rapid rising middle class consumers who not only have the financial ability to afford luxury products but also are willing to spend on them. increasing about 20 percent in 2007. According to Chadha and Husband (2006) Chinese consumers spent eight billion USD on luxury products. is the outcome of a series of internal decisions and activities. which in this model is termed as perceived service.5. 2. As illustrated. The customer experiences the service delivery and production process as a processrelated quality component and the technical solution received by the process as an outcomerelated quality component. It is also influenced by the market communication activities of the firm. while the lower portion includes phenomena related to the service provider. especially in China. 2006). The upper portion of the model includes phenomena related to customers. China has been ranked as second in HNWI population growth. China with annual growth of twenty percent in need for luxury items has become the world‟s second largest luxury branded products purchasing country surpassing the United State and joining Japan (Chadha & Husband. This basic model demonstrates the steps that have to be considered during analyzing and planning service quality. marketing communication can influence the perceived service and also the expected service.e. the model demonstrates how service emerges. The expected service is a function of the customer’s past experience and personal needs and of word of mouth communication. .

artefacts and ceramics to represent their taste and their social status this is similar with today‟s rapid demand for western luxury products. 2006). Today Chinese consumers show a general acceptance of western culture. Chinese consumers‟ luxury consumption is not only influenced by traditional ones. it has become difficult to predict future business opportunities. paintings etc that are displayed in many museums all over the world. 2.2 Luxury consumption in China Historically Chinese have longer luxury consumption than the Western countries. In the study of Chinese history luxury consumption Lu (2008) explained that ancient Chinese upper class pursued fine painting. especially in Western countries. In fact after the global financial crisis China‟s economy started to show improvements from 2008 more easily than other countries and also the Chinese government introduced many policies to stimulate the economy and this is starting to show results. modern Chinese culture also plays an important role. Nowadays. This is proven by many precious Chinese artefacts. success.5. Success in China allows luxury brands to achieve a superior share of wealthy Chinese consumers.In today‟s unstable global economy. modernity culture give Chinese consumers the chance to consume luxury products. maintain their image internationally and get the chance to compete with the future rising local luxury brands (Chadha & Husband. The increases of wealth. due to the large scale of the Chinese market. All these signs show China will grow continually. On the other hand China‟s market is showing a continually robust economy and this shows consumption of luxury products have a bright future. There are groups of westernised Chinese living in big cities like Shanghai and Beijing who now prefer the western . 1997). especially in the luxury branded products market. (Kapferer. if luxury brands want to sustain their winning power in the world they have to perform in the Chinese market. It shows that the old elite lifestyle still remains in today‟s Chinese consumer‟s mind.

As indicated above. 2004). 2. As customer satisfaction rises. . First of all in relation to globalization. so does customer repurchase intention (Anderson. as explained above.5. 2006).4 Current issues Based on the market and consumer characteristics. The desire to achieve a more western style of living will reflect and encourage more Chinese luxury consumption. 2000. so luxury brands need to find an approach that enables them to fight competition and appeal to all markets. international presence and globalization is nevertheless also positive and necessary for luxury brands. and moreover has resulted in new markets on differing evolutionary levels and hereby a culturally diverse consumer base that vary in needs and wishes.4. 2. Zhang & Shavitt. as it secures and strengthens the brand by increasing the number of different markets and hereby sales (Fellowes.3 RM in the luxury industry for improving CS The rationale for CRM is that it improves business performance by enhancing customer satisfaction and driving up customer loyalty (see figure 4). and create improved customer value propositions.education system and prefer to dress in the western style. They show a huge interest for learning experiences from overseas and they are also willing to communicate with people from other countries (O‟Cass & McEwen. which has been dubbed the ‘satisfaction-profit chain’ (Anderson and Mittal. 2007Schroeder & Salzer-Mörling. 2003). 2008. many challenges can be identified for luxury brands. which has increased competition in complex ways. and this is a real challenge. according to Zhang and Shavitt (2003) the young Chinese generation has a greater preference for foreign values and products (Wang. In addition. There is a compelling logic to the model. ¶ 18-19). Satisfaction increases because customer insight allows companies to understand their customers better. which makes it challenging to develop strong and streamlined brand communication and a clear-cut brand identity (Okonkwo. 2000).

The customers’ perception of service quality is to be given supreme priority by the luxury products industry.5 Summary of arguments This section has provided available literature about CRM in luxury products market. This in turn influences actual purchasing behaviour. 2. It is important how customers perceive the service quality to be. which has a significant impact on business performance. The gap model explained shall be a strong basis for explaining the dark side of CRM. Privacy issues shall be given importance as well.1994). . What they receive and how they receive corresponding to their expectations helps them judge the service quality to a large extent.