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Business Research Methodology

Group Members:

Karan Shah
Kunal Patel
Sushant Talesara
Vishakha Nainani
Harvi Vora
Krupali Patel
Aakash Chanchal

 Title: “Consumption of Luxury Brands”

 Research Objectives:1) To study the factors affecting purchase of luxury brands.

2) To find differences among the demographic variables based on above


The concept of luxury has been present in various forms since the beginning of
civilization. Its role was just as important in ancient western and eastern empires as it is
in modern societies. With the clear differences between social classes in earlier

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civilizations, the consumption of luxury was limited to the elite classes. It also meant the
definition of luxury was fairly clear. Whatever the poor cannot have and the elite can was
identified as luxury. With increasing “democratization”, several new product categories
were created within the luxury market which is aptly called – accessible luxury or mass
luxury. This kind of luxury specifically targeted the middle class (or what is sometimes
termed as aspiring class).

Prof. Bernard Dubois (2004) defines “luxury” as a specific (i.e. higher-priced) tier of
offer in almost any product or service category. Prof. Jean-Noel Kapferer (2005) defines
“luxury” as items which provide extra pleasure by flattering all senses at once. Several
other researchers focus on exclusivity dimension and argue that luxury evokes a sense of
belonging to a certain elite group. Several manufactured products attain the status of
"luxury goods" due to their design, quality, durability or performance that are remarkably
superior to the comparable substitutes.

There are also goods that are perceived as luxurious by the public simply because they
play a role of status symbols as such goods tend to signify the purchasing power of those
who acquire them. These items, while not necessarily being better (in quality,
performance, or appearance) than their less expensive substitutes, are purchased with the
main purpose of displaying wealth or income of their owners.

 The overall luxury industry comprises nine segments in total, one of which is personal
luxury goods. Factoring all segments, the overall luxury market exceeded €850 billion in

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2014, showing healthy growth of 7% overall, driven primarily by luxury cars (10%) and
luxury hospitality (9%). Bain research finds that international travel and tourism is
fueling an appetite for 360-degree luxury experiences, such as high-end transportation,
that includes highly customized “super cars” and yachts, as well as luxury hotels and
cruises. Not to be outdone, personal luxury goods—the “core of the core” of luxury—
continue to buoy the market. The overall market is on target to reach €223 billion in
2014, triple its size 20 years ago. Yet that growth is slowing: in 2013, luxury goods grew
7%, and in 2014, growth slowed to 5% at constant exchange rates (2% at current rates).
That slower pace is, however, more sustainable, and it reflects the “new normal” for
luxury goods. Demand from Chinese consumers, mature consumers in the US, and
Japanese shoppers returning to luxury goods have all helped shore up growth. The
following are specific regional trends:
• America—The Americas were the undisputed growth engine in 2014, delivering 6% growth at
constant exchange rates (3% at current rates). Growth in the US could have been even more
robust if it hadn’t been for a harsh winter. Brazil posted disappointing results due to local
currency devaluation, but Mexico and Canada both maintained positive performance.
• Europe—Growth across the continent was up 2%, despite persistent economic challenges,
socio-political tensions in Eastern Europe, and less dynamic tourism. The market continues to
heavily rely on international tourism, as deteriorating consumer confidence halted any significant
effects from the partial recovery among local spenders.
• Japan—Japan regained a growth leadership position in 2014, driving a positive trend through
an increase of 10% at constant exchange rates (2% at current rates) that made it the bestperforming market in real terms.
• China—Luxury spending in China showed a negative trend for the first time: –1% growth this
year at constant exchange rates (–2% at current rates), due to greater controls on luxury spending
and changing consumption patterns. Simultaneously, less established and younger accessible
brands have endeared themselves to the growing upper-middle-class “wannabe” consumer
segment, which is expected to double by 2017.

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• The Rest of Asia—Greater China is flattening while South Korea strengthened its position as a
trendsetter and influencer for fashion and luxury. In Southeast Asia, Malaysia and Singapore
were hampered by the Malaysian airline accidents, but most of the rest of the region experienced
a brisk pace of growth.

 Within specific categories of luxury goods, accessories captured 29% of the market and
grew by 4% in 2014 (at current exchange rates)—more than apparel and hard luxury
(jewelry and high-end watches), the next two largest categories. For the first time since
2007, the growth of high-end shoes surpassed that of leather goods, emerging as an
evident status symbol, albeit at a lower ticket price than other leather goods. At the
opposite end, watches took a hit from the downturn in Asia. In response, many
watchmakers cut production to sidestep the risk of oversupply. Across most categories,
the retail channel is growing, comprising approximately 30% of the market. There is an
ongoing retailization of historical wholesale formats and markets. For instance,
increasing numbers of US department stores are adopting a concession-based model.
Markets such as Russia and the Middle East have also shifted to joint ventures over the
past few years.
 Luxury has made its home in India. From Armani to Chanel and Ermenegildo Zegna to
Vacheron Constantin, renowned global brands have set up shop here. And not only in the
obvious categories of apparel, accessories, home decor, watches, wines and jewellery, but
also in fine dining, concierge services, travel and yachts. According to a February report
by KPMG-Assocham, India’s luxury market grew at a healthy 30 percent to reach $8.5
billion in 2013, and is likely to grow at 20 percent to $14 billion by 2016. The report
states that this growth has been primarily driven by lifestyle segments such as fine dining,
gadgets, hotels, jewellery, personal care and wines, as consumers refused to compromise
on the ‘luxury’ life.

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 India’s luxury potential has attracted several brands to the country in recent years. Some
others such as Godiva Chocolatier and Fabergé Jewellery plan to start operations shortly.
Additionally, some firms such as Villeroy & Boch and Bvlgari, which had earlier exited
India, are showing renewed interest in the market. This momentum has been driven by an
ever-increasing base of ultra high-net worth households (HNHs), which are likely to grow
at 27 percent till 2017-18.


 Definitions Of Quality:
¤ Quality is achieving or reaching for the highest standard as against being satisfied
with the sloppy or fraudulent." (B. W. Tuchman, 1980)
¤ "Quality refers to the amounts of the unpriced attributes contained in each unit of
the priced attribute." (K. B. Leffler, 1982)
¤ Quality is “the standard of something as measured against other things of a
similar kind; the degree of excellence of something: an improvement in product
quality” (Oxford, p. 634).

¤ The International Standards Organization defines quality as the overall
characteristic of a whole that has the capacity to satisfy the direct and tacit needs
of consumers (Brown & Rice, 1998). In other words, the quality refers to what
extent a product has satisfied its consumers.

 Quality is one of the basic benefits and functional aspect that can be seen in a luxury
product. Luxury brand consumers believe that luxury brands possess high quality. Luxury

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brand products should have a high quality that sets them apart from other non-luxury
 Cesare and Gianluigi (2011) believed that quality is the main attribute relative to luxury
goods, followed by craftsmanship, design, and aesthetic value. Particularly in developed
markets, consumers purchase luxury products for their quality and functional values
(Shukla, 2012).

 Gentry, Putrevu, Shultz, and Commuri (2001) found that the main reason why consumers
buy luxury brands is due to their high quality. However, quality is still considered one of
the main reasons for a consumer’s satisfaction or dissatisfaction regarding a product. To
better understand the measurement of quality, quality also must be defined.

 According to Brown and Rice (1998), the quality of a luxury apparel product has two
dimensions: a physical dimension that includes the design, material, finish, methods, etc.,
and a behavioral dimension that indicates what the item can achieve. Garvin (1983)
measured quality for a product in general by counting the incidence internal errors that
occur in the factory, and external errors that happen in the field. Moreover, the quality of
the luxury product should meet the consumer’s high level of satisfaction since high
quality is associated with a high price (Bian &Moutinho, 2009).
 HYPOTHESIS (H1) : “There is a positive relationship between quality and intention
to buy luxury products”

MATERIALISM: Definition Of Materialism:

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 Richins and Dawson (1992, p. 307) defined materialism as “the importance a person
places on possessions and their acquisition as a necessary or desirable form of conduct to
reach desired end states, including happiness.’’
 Materialism is also conceptualized as ‘‘a set of attitudes which regard possessions as
symbols of success, where possessions occupy a central part of life, which include
holding the belief that more possessions lead to more happiness’’ (Chan and Prendergast,
2007, p. 214).

 Luxury consumption may be especially appealing to materialistic consumers (Belk 1985,
1988; Fournier and Richins 1991; Holt 1995; Mason 1981; Prendergast and Wong 2003;
Richins 1994; Rindfleisch et al. 2000; Tatzel 2002, 2003; Watson 2003; Wong 1997;
Wong and Ahuvia 1998).
 First, materialists consider their possessions as a signal of success which implies that they
often consume them conspicuously to signal their success and wealth to others (Richins
and Dawson 1992). More generally, materialists may use luxuries to construct their
identity and to enhance their self-concept by integrating the symbolic meaning of these
luxuries into their identity (Bearden et al. 1989; Belk 1985; Dittmar 1994, 2008; Richins
1994; Vigneron and Johnson 2004). Second, materialists consider the consumption of
luxury goods as a path to personal happiness (Richins and Dawson 1992; Vigneron and
Johnson 2004). Together this suggests that materialists may spend more of their
discretionary income on luxuries than low materialistic consumers.
 This leads to the second hypothesis:
 H2: “There is a positive relationship between materialism and intention to buy
luxury products”


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 Definitions of Reference Groups:
Consumer behavior and buying is very much influenced by a consumers’ friend
group or entourage (Solomon, et al. 2010) and their opinions and behaviors.
Consumers are members of and admire several different groups and are thus
generally influenced in their purchases by a desire to conform and please others
(Solomon et al. 2010).
In everyday life, consumers exchange product information in the form of
recommendations of which products to use or avoid and that due to their everyday
life conversations, so called ‘word-of-mouth’. This has proven itself to be more
influential on buying behavior than mere advertising whether it is on billboards,
in television commercials, in the press or on online advertising.
A reference group is defined “as an actual or imaginary individual or group
conceived of having significant relevance upon an individual’s evaluations,
aspirations, or behavior”.

 Purchases such as luxury items are usually influenced by reference groups as they are
usually bought with a consumer’s discretionary income and are thus influenced by
individual’s tastes and preferences (Solomon, 2009.).
 A reference group can be defined by being a group that the consumer actually knows,
E.g. People acting in a consumer’s immediate environment, but it can also be a group that
the consumer admires and aspires to (Solomon, et al; 2010). Cultural figures such as
celebrity can be identified as inspirational reference group.

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Celebrities as a Reference Group
 Inspirational reference groups consist of people one does not actually know but that yet
the consumer admires and that he considers successful such as celebrities like actors,
models etc. (Solomon 2009).This phenomenon enables brands to hire celebrities to
represents their brands or star in their advertising campaigns in order to increase their
visibility and link their brand and products. It does have a negative impact on the
consumers as they purchase what there group would like to purchase.
H3:- There is no difference between Reference Groups and intention of consumer to
purchase luxury goods.


 Definitions of Social Comparison:

 According to the social comparison theory (Festinger, 1954), individuals compare
themselves with others to evaluate themselves. When an individual cannot find
objective or non-social ways to assess him/herself, he/she will find a way of
comparing him/herself with others in order to evaluate his/her opinions and
abilities. A unidirectional drive upward leads an individual to compare him/herself
and reduce discrepancies with those people who own higher ability (Festinger,
 Social comparison can be considered as a human’s endless awareness of acquiring
self-knowledge and being involved in self-reflective and comparative thought
(Figurski, 1982; Mussweiler and Ruter, (2003), Schiffman and Kanuk (2004)
posited that individuals could also make downward comparisons with people
slightly worse or lower than themselves as well as upward comparisons with idols
such as politicians, movie stars, singers, etc.

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 A research study conducted with Japanese consumers indicated that upward social
comparison has a positive relationship with a higher demand for worldly possessions and
higher purchasing intention (Ogden and Venkat, 2001).
 Individuals are considered to be more worldly-minded if they often interact with peers
(Moschis and Churchill, 1978) and are more easily influenced by others (Achenreiner,
1997). Chan and Prendergast (2007) indicated that peer communication, normative peer
influence, motivation to view advertisements, social comparison with friends and social
comparison with media figures all have positive effects on the attachment of worldly
 Consumers want to possess luxury goods to impress others with the desirable status the
luxury goods represent. Less wealthy consumers purchase a small number of luxury
goods each year to be accepted by the wealthy (Husic and Cicic, 2009).
 In Chinese society people need commitment to identify with their peers (Phau and
Prendergast, 2001) because within the same social class or reference group people
conform to behave appropriately (Tse, 1996). Wang et al. (2011) found a significant
relation between Chinese consumers who value luxury goods and Social Comparison.
Thus, the following hypothesis is developed:

H4:- There is a positive relationship between Social Comparison and purchase of luxury

Brand Equity

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Brand equity is one of the factors that affect the decision of consumer of buying luxury product.
It includes these 3 sub factors.
1. Brand Awareness
2. Brand Loyalty
3. Brand Association
Brand Awareness
Definition of Brand Awareness:
Brand awareness is the ability for a customer to recognize or recall that a brand is a member of a
certain product category (Aaker, 1991). Brand awareness is a fundamental attribute of customer
brand equity. (Aaker, 1986; Tong &Hawley, 2009). Brand awareness includes two elements
which are brand recall and brand recognition. Brand recall refers to whether or not customers can
recognize the brand or are just hazy about it. As to brand recognition, it refers to the level of the
connection between the brand and its products, ideas and any other dimensions.
Brand awareness is important to the company in turns of gaining market share through
brand loyalty by consumers’ strong perceptions and associations which is caused by the
awareness. In many industries, companies with the highest awareness levels also control the
largest market share. Keeping in mind the importance accorded to the concept of "Brand
Awareness" by various authors and practitioners, its research implications are well
established (Market Research Worldwide, 2009). The reason for studying brand awareness
the important role it plays in consumer decision making process.

Brand Loyalty

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Asseal (1992) defined brand loyalty as a favorable disposition towards the result in consistent
purchasesof that brand over time. Moreover, brand loyalty describes the attitude, behavior, and
choice perspectives of the customers (Javalgi &Moberg, 1997).
Brand loyalty is considered to be the strongest path leading to brand equity (Atilgan et
al.,2005).Brand loyalty has a positive and direct role in affecting brand equity (Atilgan et al.,
Brand Association
Brand association refers as all things involve consumer's imagination, product's features and the
usages about brand in the mind, the associations related to the organization, personality and
symbols (Jung and Sung, 2008). A brand association is the most accepted aspect of brand equity
(Aaker, 1992). Associations represent the basis for purchase decision and for brand loyalty
(Aaker,1991). Brand associations consist of all brand-related thoughts, feelings, perceptions,
images, experiences, beliefs, attitudes (Kotler and Keller, 2006) and is anything linked in
memory to a brand. Brand association derives from a consumer's past experience of using a
particular brand. According to Keller (2009), luxury branding typically involves the creation of
many intangible brand associations, as a luxury brand can deliver various meanings to
consumers. Keller also noted the importance of maintaining a premium image for luxury brands
that is strong, consistent, and cohesive over time.
Hypothesis: There is positive relationship between brand equity on purchasing of luxury

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