How to Solve the Conflict Between the Exclusivity Paradigm of Luxury Brands and the Open Source Character of Social Media Part 1

Written by a Master's Student of the Lund University School of Economics and Management

Welcome to the New Era, Luxury Brands!

Social media has significantly restructured the communication of companies - influencing organizations, the consumer and brands all around. Facebook, Twitter, YouTube and Instagram together register more than 2.7 billion active users who spend an average of 2.4 hours daily on these platforms (Adweek, 2014). This corresponds to 39% of the world’s population – illustrating the immense power of online users. Consumers are no longer search for information passively; they actively create content and moderate discussions on brands (Hanna et al., 2011). Nowadays, we are living in an era where corporate communication is democratized as the power over communication has shifted from organizations to consumers (Kietzmann et al., 2011). Brands had to realize that online branding is an open source activity controlled by the customer rather than by brand managers (Fournier & Avery, 2011). Posing simultaneously both an opportunity and a threat, this consumer empowerment has a significant impact on how industries operate – the luxury industry being no exception (Dubois, 2014). Due to the enormous increase of online users, digital marketing and especially social marketing has become a mandatory element for every company (Hanna et al., 2011). But why have especially luxury brands struggled so long to invest in social media?

For a long time, luxury brands defended their reluctance with the perceived contradiction of their exclusivity paradigm and the open source character of social media (Okonkwo, 2009). By investing in social media, they would not only make their brands available to the ‘great mass’ but also loose the control over their restricted communication strategy. In the following the two different concepts will be discussed and opposed to further investigate key success factors for luxury brands in social media. How luxury brands can act successfully in social media and maintain their exclusivity will be further examined regarding the case of the ’90 Years Campaign’ of the luxury brand Montblanc.

The Open Source Character I A Concept of Democratization

Marketers today act in a highly interconnected, dynamic and fast-moving environment. More than ever customers influence the success and reputation of brands – thanks to social media. Generally, social media compromises mobile and web-based technologies to create interactive platforms on which individuals share, co-create and discuss content (Kietzmann et al., 2011). Different channels like blogs, social networks, online reviews and online communities allow consumers to share and access information easily, paving the ground for the success of user-generated content (UGC) (Chen, 2007). UGC comprises any content produced by end-users and is comparable to a bottom-up marketing approach: users create value-added content by reviewing, commenting and discussing and thus become co-creators for brands (Berthon, 2009). As a result, the power of branding increasingly shifts to consumers. ‘Power’ - in this context - can be defined as ’the asymmetric ability to control people or valued resources in online social relations’ (Labrecque et al., 2013). This consumer empowerment can be strongly positive for organizations but also can cause true image damages for a brand. There are numerous cases for both sides. Hence, UGC has fundamentally changed companies’ branding and constantly creates new challenges for marketers. According to Fournier and Avery (2011) three different main developments in branding caused by social media can be identified:

(1) From Brand Building to Brand Protection

Traditionally, the ultimate aim of every brand management was the value creation for its customers – particularly luxury brands’ aim was to create exclusive brand experiences based on their emotional value propositions. But due to the aforementioned consumer empowerment, brand protection has gained even more importance (Fournier & Avery, 2011). Hence, risk assessment and risk control depict new functions of a company’s brand management, namely to timely identify risks in social media and be able to pro-actively react on these (Fournier & Avery, 2011).

(2) From Strategic Planning to Executional Excellence

For years, long-term strategic planning was key to luxury brand management but social media demands a completely contrary strategy. According to Fournier and Avery (2011), today’s brand management rather needs a high degree of flexibility, opportunism and adaptation: Brands have to excel in execution and interaction immediately instead of solely concentrating on long-term aims.

(3) From Differentiation to Resonance

Lastly, the open source character of social media caused a strategy shift from differentiation to resonance. While brand managers have traditionally striven for differentiation from competitors, today the creation of resonant conversations with consumers and their appreciation is crucial (Fournier & Avery, 2011).

These shifts in branding caused by the open source character also luxury brands highly face. In order to grasp the challenges resulted by consumer empowerment for luxury brands in particular, it is first necessary to illustrate the special characteristics of luxury brands and their brand management.

Luxury Brands I A Concept for The Select Few

Luxury brands continuously attract millions while being accessible only for a few privileged consumers. Especially their exclusivity, prestige and restricted distributions are the reasons for their attractiveness to customers. Luxury companies have experienced a constant and impressive growth worldwide. In 2014 alone, the industry realized a turnover of 223 billion Euros (Bain Company, 2014). This constant growth can be mainly explained by the customers’ increasing interest in investing in products that provide them an emotional pleasure (Hagtvedt and Patrick, 2009). By implicating their exclusivity, luxury brands can fulfill multiple emotional and socio-economic benefits for its consumer.

In order to understand the particular brand image and value proposition of luxury brands it is first necessary to distinguish them and their brand management from classical brands. Especially the six characteristics of Dubois et al. (2001) has above all gained acceptance distinguishing luxury brands and explaining their exclusive paradigm. Thereafter, luxury brands are characterized by a (1) high price, (2) high product quality, (3) uniqueness, (4) heritage, (5) aesthetic and (6) superfluity. These criteria illustrate that the brand image in the luxury brand management mainly offers an emotional value proposition based on exclusivity and intangible aspects (Seringhaus, 2008). Luxury brands correspond to the self-concept congruency of customers and the exclusive image of the brand functions as social differentiator for its customers (Seringhaus, 2008).

The function as social differentiator is also highly reflected in the buying motives of luxury customers. Especially the socio-economic Bandwagon and Snob effect are discussed as buying motives (Leibenstein, 1950). The Bandwagon effect describes a positive correlation between a consumer’s demand and the demand of a specific social group (Valtin, 2005). Customers thus purchase brands for the purpose of being accepted by a social group and to express social belonging. In contrast, consumers that are motivated by the Snob effect purchase products for differentiation. In this case, the demand of luxury consumers is negatively correlated with the overall demand of consumers (Valtin, 2005). Consumers therefore purchase luxury brands to differentiate themselves from the mass and to express exclusivity. This negative correlation simultaneously exists between the perceived value of the brand and an increasing overall brand awareness and availability.

In order to maintain their excusive paradigm, the luxury brand management generally pursues a restricted brand communication strategy. Primarily, they have concentrated their communication on channels directly addressing the target group and have relied mainly on ads in premium print magazines, communication with celebrities, direct marketing as well as sponsoring and events (Scholz, 2013). Luxury brands wanted to control every word and single image that has been published on the brand – even resorted to indirect manipulation of journalists (Adage, 2012). Everything was tailored to the exclusivity paradigm. So far, so good. But since the increasing digitalization of marketing activities, luxury brands fear the loss of control. According to Franck Sagne, Head of Digital Marketing at the leading luxury concern LVMH, the commitment to social media is a though stance to take for luxury brands: “We can’t hide ourselves in an ivory tower but we have to remain precious and exclusive.” Thus, the challenge of today’s online marketing of luxury brands lies in maintaining their exclusivity paradigm while opening their communication multiple online users.

Based on this theoretical basis the next post will provide an interesting best practice case of Montblanc’s ‘90 Years Campaign’ in order to further investigate key success factors for luxury brands in the open source environment of social media.