Retaining the allure of luxury brands during an economic downturn

Abstract

Purpose
– Despite the changing conditions worldwide, some global luxury brands have attained strong performance levels, and perhaps it is their globalness that keeps them resilient. Since the global luxury market is comprised of customer segments with relatively homogeneous needs, wants and motivations, achieving a global luxury brand positioning will help mitigate the negative consequences of economic crises, regardless of the market in which a luxury brand operates. The paper aims to discuss these issues.

Design/methodology/approach
– A survey instrument was administered to a sample of 200 professionals located in a European country where none of the global brands cited in the paper are originating. The country was also selected on the basis of its propensity to have local luxury brands in competition with the global brands in each of the categories tested. The survey was conducted during the peak of economic crisis in Europe.

Findings
– This study provides evidence that brand globalness may be a major value creating factor, and thus a source of competitive advantage for luxury brands competing in the global marketplace. Another question addressed by this study is should the luxury brand modulate the message projected in the media away from luxury and closer to quality or other stimuli less associated with luxury in order to avoid luxury shame. All these are questions addressed by this imperial study to investigate how the brand globalness influences consumer perceptions in global recessionary times.

Originality/value
– The proposed research formulates an empirical study of the underlining effects of what is referred to as “glocalization” in the literature on the luxury positioning. This study provides evidence that brand globalness may be a major value creating factor, and thus a source of competitive advantage for a luxury company competing in the global marketplace.

Full text

Retaining the allure
of luxury brands during
an economic downturn
Can brand globalness influence
consumer perception?
Salah Hassan
Marketing Department, George Washington University,
Washington, District of Columbia, USA
Melika Husić-Mehmedović
Marketing Department, School of Economics and Business in Sarajevo,
Sarajevo, Bosnia and Herzegovina, and
Philippe Duverger
Marketing Department, Towson University, Towson, Maryland, USA
Abstract
Purpose –Despite the changing conditions worldwide, some global luxury brands have attained
strong performance levels, and perhaps it is their globalness that keeps them resilient. Since the global
luxury market is comprised of customer segments with relatively homogeneous needs, wants and
motivations, achieving a global luxury brand positioning will help mitigate the negative consequences
of economic crises, regardless of the market in which a luxury brand operates. The paper aims to
discuss these issues.
Design/methodology/approach –A survey instrument was administered to a sample of 200
professionals located in a European country where none of the global brands cited in the paper are
originating. The country was also selected on the basis of its propensity to have local luxury brands in
competition with the global brands in each of the categories tested. The survey was conducted during
the peak of economic crisis in Europe.
Findings –This study provides evidence that brand globalness may be a major value creating factor,
and thus a source of competitive advantage for luxury brands competing in the global marketplace.
Another question addressed by this study is should the luxury brand modulate the message projected
in the media away from luxury and closer to quality or other stimuli less associated with luxury in
order to avoid luxury shame. All these are questions addressed by this imperial study to investigate
how the brand globalness influences consumer perceptions in global recessionary times.
Originality/value –The proposed research formulates an empirical study of the underlining effects
of what is referred to as “glocalization”in the literature on the luxury positioning. This study provides
evidence that brand globalness may be a major value creating factor, and thus a source of competitive
advantage for a luxury company competing in the global marketplace.
Keywords Value consciousness, Economic recession, Global luxury brands
Paper type Research paper
Introduction
The recent economic downturn affected every market worldwide, but how did it
influence the global luxury industry? Once thought of as “unsinkable,”the luxury
industry was undergoing a significant repositioning. Perhaps this was the first
recession that luxury brands had to go through such major changes. Even old
well-established luxury brands with long history of global brand leadership that
Journal of Fashion Marketing and
Management
Vol. 19 No. 4, 2015
pp. 416-429
© Emerald Group PublishingLimited
1361-2026
DOI 10.1108/JFMM-03-2015-0030
Received 30 March 2015
Revised 30 March 2015
Accepted 21 April 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1361-2026.htm
416
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

typically depended on a small number of very high-ticket sales, seemed to have
experienced problems recently.
Despite the global changes in world economy, the luxury market has sustained
constant growth and at the end of 2014 it will reach US$280 billion (Altagamma
Foundation, 2011) while currently it is estimated to US$240 billion (Tungate, 2012).
The global luxury market is experiencing annual growth rate of approximately
2 percent, while it declines 1 percent during the economic recession of 2007-2010
(Altagamma Foundation, 2011).
Nevertheless, growth trends are not equally spread throughout the world. The relative
luxury market growth rates for Russia –forecast to grow fourfold by 2015; China, from
$2 to $11.2 billion; and in India it is set to jump tenfold (Husic and Ostapenko, 2010).
Recent economic downturn undoubtedly jeopardized the nature of product offering,
making luxury goods companies trade glitz and ostentation for “discreet chic”
(The Economist, 2009). Purchases depend on consumers’having disposable income,
feeling confident about their future, trusting in business and the economy, and
embracing lifestyles and values that encourage consumption (Quelch and Jocz, 2009).
Some critics suggest that the entire industry may be taking a new course due to
noticeable changes in external environment. One factor that has had an influence on the
luxury industry is the shift in consumer demand. For instance, consumers in emerging
markets are becoming more sophisticated in their tastes (Husic and Ostapenko, 2010).
Opinions on the crisis’influence on the luxury market are split among theoretical
and practical overview. Luxury goods sales are expected to rise 8 percent in China and
Russia in the segment of handbags, leather goods and clothes (Altagamma Foundation,
2011). However, this growth is slower compared to 12 percent rise in 2010. Breaking
this in sectors, leading one is leather goods, followed by the jewelry and watches.
In crisis certain luxury items like jewelry are used as investments or hedges against
inflation. With the cost of precious metals continuing its increase and with it jewelry’s
perceived inherent value, panned jewelry purchases are also most likely to be made
now to avoid further inflation rather than deferred.
Although the financial market turmoil is reported to be crimping sales of
luxury brands in the mature markets, there is little sight of this in the Gulf States.
Affluent consumers in the Gulf are resilient due to the fact that luxury shopping is
perceived as an instrument for personal pleasure and main source of entertainment
(Altagamma Foundation, 2010).
On the other side, economists find consumers spend less and look for lower prices
when times are tough. Although an ultra-hedonistic type of luxury indulgence is still
something that consumers will –at least occasionally –want to satisfy, certain luxury
aspirations are undoubtedly subject to greater scrutiny and questioning now (Yeoman,
2011). However, they found higher income households reduced and eliminated various
expenditures to a lesser extent than middle-class families (Nunes et al., 2010).
Silverstein and Fiske (2003) think that it is the middle class that is usually being hit
with the crisis. The truly upper-income consumer does not seem to be affected. Brands
such as Burberry and Coach, which grew their business by positioning as “accessible
luxury”during the boom years, are now in trouble. However, mainly old
well-established luxury brands with a long history that depend on small numbers
of very high-ticket sales will continue to prosper. Nevertheless, not all of them were as
successful in overcoming the changes in the global economy. For example, Alexander
McQueen, Stella McCartney and Lanvin closed their stores less than 18 months
after their respective grand openings in Moscow (Husic and Ostapenko, 2010).
417
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Chanel purportedly cut its wholesale prices in the USA by 7 to 10 percent, with Versace
and Chloe following suit (Ritson, 2008). Despite claiming to never engage in promotions,
Tiffany had to lower the prices on diamond engagement rings by about 10 percent
(Rosenbloom, 2009). During recessions, of course, consumers set stricter priorities
and reduce their spending. As sales start to drop, businesses typically cut costs,
reduce prices and postpone new investments. Marketing expenditures in areas
from communications to research are often slashed across the board –but such
indiscriminate cost cutting is a mistake, think Quelch and Jocz (2009). Although it is
wise to contain costs, failing to support brands or examine core customers’changing
needs can jeopardize performance over the long term. Building and maintaining
strong brands during the economic hardship –ones that customers recognize and
trust –remains one of the best ways to reduce business risk.
The truth is that the consumer market is just slowing down and shifting modes.
One extracts the sense that at least a small dose of luxury is taken as a birthright by the
mass of consumers and that millions are primed to upgrade to quality rather than
accumulate quantity (Yeoman, 2011). It takes time to adjust psychologically to the idea
of bad times that affect even Russia, the wealthiest segment of the most affluent of the
non-western nations.
Despite the global and precisely European economic hardship some global luxury
brands have attained strong performance levels, so perhaps it is their globalness that
keeps them resilient? There are number of the luxury product categories in which
consumer behavior does not vary significantly across cultures or countries
(Altagamma Foundation, 2011). There is evidence that some segments of consumers
(e.g. luxury aspiring consumers) might be more similar across national boundaries than
those within the same country. Inevitably, many product categories associated with
conspicuous consumption are more likely to benefit from perceived global brand, or
even to survive economic crisis.
In this paper, the authors investigate the connection between the perceived brand
globalness and perceived brand luxury in the context of enabling the firm to prosper
despite the European economic downturn. This will be the case if global luxury brands
are perceived to be more valuable than local luxury brands. Data are collected in
Europe, in the peak of economic crisis.
Brand globalness and perceived brand luxury
Existing studies show that under the conditions of standardized messages and
globalized brand offerings consumption will be harmonized cross-culturally due to
segment simultaneity (Elinder, 1961; Fatt, 1964; Levitt, 1988; Ohmae, 1985; Roostal,
1963). For example in particular product categories like luxury fashion apparel, cars,
leather goods and jewelry; consumption behavior will not vary notably as these brands
appeal to consumer segments that have tendency of exhibiting similar behavior across
cultures or countries (Dawar and Parker, 1994). Given that the globalization of
consumer markets and the global acceptance of products and brands lead to a
globalization of the behaviors and attitudes of consumers and that, under certain
conditions, there is a greater similarity in the values of customers from different
countries than among different customers in the same countries (Anderson and He, 1998),
it can be useful to use groups of consumers rather than countries as a basis for
identifying international segments ( Jain, 1989). Segments of consumers like the “global
elite”might be more similar across national boundaries than those within the same
country (Hassan and Kaynak, 1994; Hassan and Katsanis, 1994). Steenkamp et al. (2003)
418
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

define brand globalness as the degree to which the brand is perceived to have
multi-market reach and thus believed to be globally available, desirable and demanded.
In this sense, if a brand is viewed as globally available and thus there is a global
acceptance for the product (i.e. consumers in other markets desire, demand, choose and
use the brand) consumers may perceive the brand as signaling more prestige and
credibility than local brands. Global brands with consistent positioning may benefit
from a unique perceived image worldwide. Such a global positioning increases in its
strategic appeal as consumers around the world develop similar needs and tastes
(Hassan and Katsanis, 1994; Ozsomer and Simonin, 2004). In this study, the authors
refer solely to luxury brands in terms of their perceived globalness.
Batra et al. (2000) found that in product categories rating higher on conspicuous
consumption, the effect of perceived non-localness of the brand on brand attitude becomes
more positive. Thus, product categories associated with conspicuous consumption are
generally more likely to benefit from perceived global brand. Referring to personal and
interpersonal-oriented perceptions of luxury, it is expected that different sets of consumers
would have different perceptions of the luxury value for the same brands, and that the
overall luxury value of a brand would integrate these perceptions from different
perspectives (Wiedmann et al., 2007). Luxury consumers across national boundaries and
common structures in luxury value perception exist cross-culturally –even if the relative
importance of the decision determinants may vary (Wiedmann et al., 2007).
Currently, main global luxury brands are presented in the Table I.
Even though consumers in different parts of the world buy or wish to buy luxury
products for apparently varied reasons, they possess similar values. Regardless of their
country of origin their basic motivational drivers are really the same, only the
individual weighing differs (Wiedmann et al., 2007). In a global marketplace, there is no
conceivable understanding of luxury that is nationally or regionally bound. However, it
has to be stated that to some extent ethnocentrism and “country of origin”effects may
interfere. Wiedmann et al. (2007) defined four key luxury dimensions: financial,
functional, individual and social. In a cross-cultural context it is expected that these key
luxury dimensions are perceived differently by different sets of consumers, even if the
overall luxury level of a brand may be perceived equally. Therefore, the impact of each
of the antecedent constructs and the key dimensions on the overall luxury value
perception may vary across different cultures. Further research of Hennigs et al. (2012)
has showed that there are similarities in consumer perceptions that cross-national
borders, and thus it is possible to identify common structures across country.
Consumers prefer global brands because they create perception of brand
superiority, and thus preference for global brands even when quality and values are
Overall rank Brand name Brand value ($m) Change in brand value (%)
17 Louis Vuitton 24,893 6
38 Gucci 10,151 7
54 Hermès 7,616 23
60 Cartier 6,897 26
72 Prada 5,570 30
75 Tiffany and Co. 5,440 5
77 Burberry 5,189 20
Source: Interbrand report 2013 “best global brands”
Table I.
Best global luxury
brands 2013
419
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

not “objectively”superior (e.g. Kapferer, 1997; Keller, 1998; Shocker et al., 1994).
Global brands are positively related to both perceived brand quality, prestige and
subsequently the purchase likelihood (Steenkamp et al., 2003). In a developing country
setting, Batra et al. (2000) found a direct relationship between the perceived
non-localness of the brand and attitude toward the brand. Steenkamp et al. (2003) found
that brand globalness significantly increased purchase intent through perceived
prestige. This positive relationship is related to status enhancement motivations in
addition to perception of high quality of non-local brands.
In the time of the economic recession, global luxury brands Louis Vuitton and Gucci,
the world’s top two luxury brands according to Interbrand’s report for 2008, 2009 and
2010, are more resilient compared to the rest of the industry. More resilient to the crises
proved to be brands that have global presence (Altagamma Foundation, 2011). It is
possible to conceive that country of origin for a luxury good is part of the prominent
signals to those status seekers. Therefore, authors have hypothesized the following:
H1. Perceived brand globalness is positively related to perceived brand luxury.
The role of value consciousness (VC) in luxury purchase
Perceived value is the overall assessment of the utility of a product based on what is
received and what is given (Zeithaml, 1988). Hence a group of consumers exhibiting a
trait called value consciousness has been characterized as seeking value in goods or
services via lower prices for an equivalent quality (Lichtenstein et al., 1990).
Value-conscious consumers are more knowledgeable about the products and the
price points; they are more brand loyal than coupon prone consumers, which might
focus and value more the “deal”offered than the marginal utility emanating from the
price-quality bundle.
The gloomy mood of economic slowdown influences spending behavior (Yeoman, 2011;
Urwin and Spanier, 2008). In the time of economic downturn, buying luxury is not
something people are proud of –it could be luxury shame (which Venezia (2009) defined as
the anxiety felt by consumers for buying a luxury brand product) or guilt downsizing. It is
more socially expedient to tone-down signals (Clark, 2009; Han et al., 2010). The far-ranging
financial instability has made many consumers hesitant to own or use luxury goods, since
they are perceived as outward displays of wealth (Vinelli, 2009). Therefore, Quelch and Jocz
(2009) believe that in the time of recession usual segmentations techniques (demographic or
lifestyle segmentation) may be less relevant than a psychological segmentation that takes
into consideration consumers’emotional reactions to the economic environment. Marketers
should segment customers according to their recession psychology (from fearful to
carefree) and how they categorize their purchases (from essentials to expendables).
Whereas Wiedmann et al. (2009), based on the main values that determine luxury
consumption, defined four main clusters for luxury consumers, naming them: materialists,
rational functionalists, extravagant prestige-seekers and introvert hedonists.
Nunes et al. (2010) in their study further suggest that price increase might have
helped luxury brands in compensating for the loss in quantity, which is one of the main
characteristics of luxury branding. Thus, if during a recession luxury goods tend to
increase brand prominence in order to secure sales from the status seekers, while others
less concerned by status shy away from patronizing these brands. Luxury brands at
the top end risk over-exposing them by expanding too far into the mass market
through over diffusion, therefore they must find new ways to maintain their luxury
credentials (Yeoman, 2011; Albrech et al., 2013).
420
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Out of the above discussion, the present study suggests that consumers less
attached to status might see more value in local luxury brand motivated possibly by
guilt or VC shared within their group of reference. If luxury brands in times of recession
tend to be more conspicuous and more expensive, value-conscious consumers might
see more value in local brands than in global brands, and seek value while toning down
their signal of status. Therefore, this study defined the following hypothesis:
H2. VC is negatively related to perceived brand globalness.
The perceived uniqueness of luxury brands comes from the fact that the vast majority
of luxury brands have strong cultural roots; many enjoy a long history that stretches
across multiple generations. Under these conditions luxury brands become bearers of
tradition of craftsmanship. These factors ultimately translate into added value of a
luxury good or service, granting customers a sense of exclusivity and making them feel
special (Kapferer, 2009). Thus, in a recession one would expect to find value-conscious
consumers seeking deals when looking for luxury goods.
Despite all these changes in the luxury market, it is the brand, not the business, is
inarguably the reason why consumers choose these goods and services (Danet et al.,
2009). Likewise, it is the brand that influences behavior more than factors like
distribution, functionality or even price. Ultimately, the brand is responsible for most of
the value created by the business. Therefore, it is important that luxury brands
remember that they function differently than other brands (Danet et al., 2009).
Their challenge is to develop the brand without jeopardizing its appeal, largely based
on its limited diffusion level (Albrecht et al., 2013).
Brand loyal consumers often resort to heuristics and habitual learning strategies in
their decision making, where value-conscious consumers are involved in deep learning
practices (Sproles and Sproles, 1990). Hence, brand loyal consumers might perceive
conspicuous luxury brand more favorably than value-conscious consumers. The latter,
who might be seeking the best price for a given quality, might include affluent consumers
less concerned by brand prominence, and more concerned by intrinsic luxury cues.
Thus, the authors hypothesize that global luxury brands will be perceived to be more
luxurious than local luxury brands in the higher income group. Therefore, we hypothesize:
H3. Perceived brand globalness is more positively related to perceived brand luxury
when income level is higher.
This study further hypothesizes that in the group with higher value consciousness,
although global brand will far better than local brand, the level of perceived luxury
of the global brands will be lower than that perceived by the group characterized by
a low level of VC. Furthermore, the value-conscious group will not differ on the basis
of income in their perception of luxury between global and local brands, but will show
significant level of guilt as a motivation for their behavior. Previous discussion leads to
the following hypothesis:
H4. VC is less negatively related to perceived brand globalness when income level
is higher.
Out of the above, authors propose the following conceptual model Figure 1.
Method and analysis
A survey instrument was administered to a sample of 200 professionals located
in a European country where none of the global brands cited in Table I are originating.
421
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

This is to ensure that the participants would clearly identify global brands from local
brands. The country was also selected on the basis of its propensity to have local
luxury brands in competition with the global brands in each of the categories tested.
The survey was conducted during the peak of economic crisis in Europe. In all,
126 complete surveys were collected, representing a response rate of 63 percent.
The sample is composed of 66.2 percent female. Mean age is 32.97 years old (SD ¼0.64);
and the mean income is $48,800 (SD ¼$6,600). The authors recognized that the sample
is skewed toward woman and this presents a limitation in addition to collecting data
from a single country population which limit the generalization of study results.
The participants were asked to pick two of their favorite brands from a list of global
brands organized by categories (accessories/jewelry; accessories/watches; automobile;
beverage; cosmetics; fashion, and technology). Authors have chosen those categories
because they are especially sensitive to social influence as a display of wealth are the
most visible. They were subsequently asked to evaluate the statement: “this brand is
luxury”on a five-point scale (1 –not descriptive to 5 –very descriptive). Following each
choice of a brand in each category, the respondents were asked if they could think of a
local brand that would compete with the brand they just chose. They would then name
the local brand and evaluate it on the same basis of luxury perception, i.e., “this brand
is luxury”on a five-point scale (1 –not descriptive to 5 –very descriptive). Table II
shows the mean perception of luxury for the first and second global brands chosen by
the respondent, and the mean perception of luxury for the local competing brand.
In order to test H1 a directional paired sample t-test was used, which is represented
in Table III. It shows that the mean perception of luxury for the two global brands
respondents picked first is not significantly different. However, there is a significant
difference between the global brands and the local brands. Local brands are perceived
to be significantly less luxurious than the global brand (see Table III).
Additionally a comparison of the mean differences within each category shows that in
almost every category the global brands are perceived to be more luxurious than the
competing local brands (see Table IV), which proves H1. There are two exceptions to that
H4 (+)
H3 (+)
H2 (–)
H1 (+)
Perceived Brand
Globalness
Perceived Brand
Luxury
Value
Consciousness
Income
Figure 1.
Conceptual model
Source Mean perception of luxury SD
Global 1 4.14 0.95
Global 2 4.03 1.03
Local 3.07 1.18
Note: n¼126
Table II.
Paired sample
statistics global
brands vs
local brands
422
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

rule. The cosmetic category shows only one global brand to be significantly perceived as
more luxurious than the local brand, and the accessories/jewelry category were both
global brands are not perceived to be more luxurious than the local competing brand.
The authors were then interested, while testing the H2, in the interaction between
the underlying motivation for luxury purchase in the context of the economy and
the perception of luxury that global brands have vs local competing brands.
VC measures were taken from the literature (adapted from Lichtenstein et al., 1990;
Pairs Mean difference SE
Global 1 vs Global 2 0.105 0.122
Global 1 vs Local 1.07* 0.174
Global 2 vs Local 0.965* 0.170
Notes: n¼126. *po0.05
Table III.
Paired sample
differences
Pairs Mean difference SE
Accessories/jewelry
Global 1 vs Global 2 0.077 0.31
Global 1 vs Local 0.461 0.46
Global 2 vs Local 0.384 0.38
Accessories/watches
Global 1 vs Global 2 0.375 0.32
Global 1 vs Local 1.500* 0.46
Global 2 vs Local 1.125* 0.39
Automobiles
Global 1 vs Global 2 ‒0.142 0.34
Global 1 vs Local 1.125* 0.35
Global 2 vs Local 1.142* 0.55
Beverages
Global 1 vs Global 2 0.222 0.27
Global 1 vs Local 1.200* 0.36
Global 2 vs Local 1.111* 0.48
Cosmetics
Global 1 vs Global 2 0.285 0.42
Global 1 vs Local 1.14 0.73
Global 2 vs Local 0.857* 0.40
Fashion
Global 1 vs Global 2 0.000 0.25
Global 1 vs Local 1.200* 0.32
Global 2 vs Local 1.200* 0.42
Technology
Global 1 vs Global 2 ‒0.333 0.33
Global 1 vs Local 1.333* 0.33
Global 2 vs Local 1.666* 0.33
Notes: n¼126. *po0.05
Table IV.
Paired sample
differences by
categories
423
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Cronbach’sα¼0.75) allowed the respondents to be categorized in two groups using a
median split method. Significant differences between the two groups were uncovered.
The low-VC group did not find any perceived difference between global brands and local
competing ones (see Table V), while the high-VC group expressed significant differences
in perception of luxury brand globalness in three out of seven categories (accessories/
watches; cosmetics; and fashion). Hence, the above is partially supporting H2.
H3 suggested that income level would predict difference in luxury perception, where
high-income consumers will perceive global brands to be more luxurious than local
brands. Mean differences were tested and revealed, in support of H3, that high-income
consumer not only perceived global brands (M
global
¼3.94, SD. ¼0.978) to be more
luxurious than local brands (M
local
¼2.44, SD ¼1.034; mean difference ¼1.49,
t
(df ¼78)
¼9.65, po0.001), but that high-income consumers difference in
perception (M
highincome
¼1.49, SD ¼0.006) is significantly greater than the difference
in perception of the low-income consumer (M
lowincome
¼1.07, SD ¼0.020) group with a
mean difference of –0.42 (t
(df ¼171)
¼2.14, po0.05).
To test H4 we conducted a 2 ×2 analysis of variance (High vs Low income; High vs
Low VC) by examining the influence of interaction between income and VC on the
luxury brand globalness (e.g. global and local). The interaction is presented in Figure 2.
Simple effects tests were performed by using a Bonferroni adjustment to hold the α
level at 0.05. This insures that the results are not significant due to the number of
variables, but are germane to the effect under study.
The overall model is significant (see Table VI), F
(3,169)
¼11.53, po0.001, η
2
¼0.17, and
explains 17 percent of the variance in the dependent variable (difference in luxury
perception between local and global brands). The effect would be considered medium to
large in size based on the context of ANOVA studies (Cohen, 1988). The main effect of
income, F
(1,169)
¼0.8.59, po0.05, η
2
¼0.05, is significant, and the main effect of VC,
F
(1,169)
¼31.51, po0.001, η
2
¼0.16 shows a significant medium effect size. These effects
are superseded by the significant income ×VC interaction, F
(1,169)
¼12.51, p¼0.001,
η
2
¼0.07 (a medium effect size). These results mean that a local brand, on average, would
be perceived as more luxury than a global brand when the consumer evaluating the
brands exhibits both a high income and a high-VC level supporting H4.
Pairs Mean difference SE
Accessories/watches
Global 1 vs Global 2 0.428 0.37
Global 1 vs Local 1.714* 0.47
Global 2 vs Local 1.285* 0.42
Cosmetics
Global 1 vs Global 2 0.333 0.49
Global 1 vs Local 1.333 0.84
Global 2 vs Local 1.000* 0.45
Fashion
Global 1 vs Global 2 0.000 0.25
Global 1 vs Local 1.333* 0.49
Global 2 vs Local 1.333* 0.56
Notes: n¼68. *po0.05
Table V.
Selected paired
sample differences
by categories
for the high-value-
conscious group
424
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Potential contributions and implications
Several potential contributions can be drawn from this present research. First, global
brands may need to have local strategies that are necessary or historical in nature.
These brand-level strategies are suggested to be driven by two main elements of the
marketing mix: price and communication message. At the country level a different
effect is suggested. Where some global brands are competing with local brands, tactics
that are at odds with the brand’s world positioning might actually have a positive effect
given a country setting in terms of competition and state of the economy. In essence,
the proposed research formulates an empirical study of the underlining effects of
what is referred to as “glocalization”in the literature (Thompson and Arsel, 2004;
Robertson, 1995) on the luxury positioning.
Also, this research offers several implications to make a luxury brand more
“recession-proof”and nurture its global status. This study provides evidence that brand
globalness may be a major value creating factor, and thus a source of competitive
advantage for a luxury company competing in the global marketplace. Since global
luxury market is comprised of customer groups with relatively homogeneous needs,
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Low VC Hi VC
Low Inc
Hi Inc
Notes: Low Inc, Low income; Hi Inc, High income; Low VC,
Low-value-consciousness; Hi VC, High-value-consciousness.
The lower the difference the more the local brand is valued
Figure 2.
Estimated marginal
means of perceived
luxury difference
between global and
local brands
Source Type III sum of squares df Mean square Fp-value Partial η
2
Corrected model 54.63 3 18.21 11.53 0.000 0.170
Intercept 175.93 1 175.93 111.45 0.000 0.397
Income high 13.57 1 13.57 8.59 0.004 0.048
VC high 49.74 1 49.74 31.51 0.000 0.157
Income high ×VC high 19.74 1 19.74 12.51 0.001 0.069
Error 266.79 169 1.58
Total 515.00 173
Corrected total 321.42 172
Note: VC, value consciousness
Table VI.
ANOVA summary
table of between-
subject effects
dependent variable:
mean difference in
luxury perception
425
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

wants, and motivations, achieving a global luxury brand positioning will help mitigate
the negative consequences of economic crises, regardless of the market in which a luxury
company operates. This study provides evidence to support the strategy that some firms
have undertaken in the mist of the current recession when some global brands toned
down the message projected inthe media away from luxury and closer to quality or other
stimuli less associated with luxury. However, firms that are selling accessories, jewelry,
automobiles, beverages, or technology may not have to adapt their message much more
considering that even in the most sensitive group of consumers –the high-VC group –the
perception that the global brand is more luxurious than the local brand is not significant.
Some product categories such as fashion and accessories may reap a greater benefit
from perceived brand globalness, compared to other products groups such as jewelry and
cosmetics. Thus, a major consideration for the decision maker is to determine what portion
of the marketing budget should be allocated toward maintaining brand globalness at a
time of crisis. Specific product category may be used to guide those decisions.
Global brands are more likely to enjoy greater customer preference, and stronger
purchase intent, compared to equivalent local brands. In other words, when luxury
consumers are ready to spend on luxury products at a time of crisis, they will pay for
an “investment grade”luxury brand –one that possesses a global luxury status, and
distinguished luxury consumers worldwide. This will be especially true for luxury
consumers who are very value conscious (those that seek for the best combination of
tangible and intangible benefits behind a luxury brand logo).
Also, vital marketing mix elements such as communication, price, and products
remain important instruments to maintain luxury brand globalness at a time of crisis.
While management of a global luxury brand is a balancing act that requires all
different elements in a marketing mix to work smoothly together, it is communication
that sets the overall tone of all brand-consumer interactions and guides consumer
expectations. In communicating value of a global luxury brand it is important to
remember that the luxury brand is speaking to the global audience, which includes
various stakeholders, including existing customers and non-customers who may,
eventually, “graduate”to the status of a luxury brand consumer.
While motivations behind purchase and spending patterns will vary country by
country, one thing appears to be true for all nations: luxury consumers want to attain
the status of exclusivity recognized on the broader international level, and feel that they
belong to the global luxury community. While some degree of localization is important
in communicating luxury product value, it is important to use it in measured quantities.
On one hand, luxury companies can not neglect the historical and cultural ties that may
exist between a given country and the brand. Emphasizing existing historical ties may
help luxury brands resonate better with consumers. At the same time, it might be
damaging for a global luxury brand to neglect the importance of culture of its own
country of origin in its communications. After all, many luxury customers will buy
Chanel because it is French haute couture or a Tag Heuer watch because it was created
by a legendary Swiss watchmaker. Thus, the role of a luxury company is to localize its
communication in such way that respects delicate connection, without jeopardizing the
brand’s holistic global image.
During economic recession, it may also be important to tone down the imagery used
to communicate the value of the product, stripping any excessive glitz and ostentation.
It may be helpful to remind consumers that when the economy is down, it is time
to invest into the products that offer a greater value –quality, timelessness and
connection to artisan tradition. Encourage luxury consumers to invest into a product
426
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

that will not spur the feelings of “social guilt”; yet it will be unique and recognizable
enough to convey the right social message about status of its owner.
This study may have some implications for product design. While traditionally
luxury companies refrained from listening to customers too much (as this may result of
a failure to inspire the dream), the recession taught luxury companies a very important
lesson: listening to your customer is paramount, especially during economic crises.
In the depressed global economy, when even the richest of the rich were not willing to
flaunt their wealth, it is imperative to make the necessary adjustments to product
design. Inability to switch gears (e.g. continue offering flashy and ostentatious goods
when global luxury consumers demand more discreet designs that yet present a great
value) may result in loosing relevance in the eyes of consumers.
Price remains a crucial element that helps maintaining global status of a luxury
brand. While pricing alone is hardly enough to position brands in the global luxury
category, it helps fortifying many important brand associations such as high-product
value, uniqueness, exclusivity, as well as social status and prestige. Pricing is an
instrument that helps maintaining luxury brand equity at the time of crisis. Thus, any
dramatic pricing changes that may jeopardize important brand associations in the
minds of consumers must be done with great caution.
The same logic applies to other important elements in the marketing mix –distribution,
and people. While adopting elements of localization contributes to creating stronger brand-
consumer ties, it must be done with care. In order for a luxury brand to maintain a global
luxury brand status, it must be able to meet superb standards of distribution and customer
service in all global locations. This becomes especially important since luxury consumers
increasingly shop in more than one location in the same country, or often in multiple
countries. This used to be the case with the Japanese and, increasingly, Chinese luxury
consumers, who like to shop in multiple European destinations to get the luxury experience
in an authentic environment. A certain degree of localization is inevitable; however it is
crucial to do so without losing the global luxury brand appeal and uniform global identity.
References
Altagamma Fondation (2010), Altagamma Worldwide Markets Monitor, Altagamma Fondation,
available at: www.altagamma.it/sezione1.php?Lingua=ing (accessed March 2010).
Altagamma Fondation (2011), Altagamma Worldwide Markets Monitor, Altagamma Fondation,
available at: www.altagamma.it/sezione1.php?Lingua=ing (accessed November 2011).
Albrecht, C.M., Backhaus, C., Gurzki, H. and Woisetschlaeger, D.M. (2013), “Drivers of brand
extension success: what really matters for luxury brands”,Psychology & Marketing, Vol. 30
No. 8, pp. 647-659.
Anderson, P.M. and He, X. (1998), “Price influence and age segments of Beijing consumers”,
Journal of Consumer Marketing, Vol. 15 No. 2, pp. 152-169.
Batra, R., Ramaswamy, V., Alden, D.L., Steenkamp, J.B. and Ramachander, S. (2000). “Effects
of brand local/non-local origin on consumer attitudes in developing countries”,Journal of
Consumer Psychology, Vol. 9 No. 2, pp. 83-95.
Clark, J. (2009), “Guilt trip”,USA Today, March 6.
Cohen, J. (1988), Statistical Power Analysis for the Behavioral Sciences, 2nd ed., Erlbaum, Hillsdale, NJ.
Danet, J.B., Feldmeth, J., Ricca, M., Stucky, N. and Hales, G. (2009), “Lessons from the leading
luxury brands 2008 by Interbrand’s leaders in luxury markets”, Interbrand report,
available at: www.interbrand.com (accessed March 2010).
427
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Dawar, N. and Parker, P. (1994), “Marketing universals: consumers’use of brand name, price,
physical appearance, and retailer reputation as signals of product quality”,Journal of
Marketing, Vol. 58 No. 4, pp. 81-95.
(The)Economist (2009), “The substance of style”,LVMH in the Recession, Vol. 392 No. 8649, p. 79.
Elinder, E. (1961), “How international can advertising be?”,International Advertiser, December,
pp. 12-61.
Fatt, A.C. (1964), “A multinational approach to international advertising”,International
Advertiser, September, pp. 17-20.
Han, Y.J., Nunes, J.C. and Dreze, X. (2010), “Signaling status with luxury goods: the role of brand
prominence”,Journal of Marketing, Vol. 74, No. 1, pp. 15-30.
Hennigs, N., Wiedmann, K.P., Klarmann, C., Strehlau, S., Godey, B., Pederzoli, D., Neulinger, A.,
Dave, K., Aiello, G., Donvito, R., Taro, K., Petrovicova, J.T., Santors, C.R., Jung, J. and Oh, H.
(2012), “What is the value of luxury? A cross-cultural consumer perspective”,Psychology &
Marketing, Vol. 29 No. 12, pp. 1018-1034.
Hassan, S.S. and Katsanis, L.P. (1994), “Global market segmentation strategies and trends,
globalization of consumer markets: structures and strategies”, in Hassan, S.S. and Kaynak, E.
(Eds), International Business Press, New York, NY, pp. 47-62.
Hassan, S.S. and Kaynak, E. (1994), “The globalizing consumer market: issues and concepts,
in globalization of consumer markets: structures and strategies”, in Kaynak, E. and
Hassan, S.S. (Eds), International Business Press, New York, NY, pp. 19-25.
Husic, M. and Ostapenko, N. (2010), “Celebrating recession in style: the mainstreaming of
attitudes toward luxury consumption in the Balkans and European Russia”,2010 Oxford
Business and Economics Conference,Oxford,June 28-30.
Jain, S.C. (1989), “Standardization of international marketing strategy: some research hypotheses”,
Journal of Marketing, Vol. 53 No. 1, pp. 70-79.
Kapferer, J.N. (1997), Strategic Brand Management, Kogan Page, London.
Kapferer, J.N. (2009), The Luxury Strategy, Kogan Page, London.
Keller, K.L. (1998), Strategic Brand Management, Prentice Hall, Upper Saddle River, NJ.
Levitt, T. (1988), “The pluralization of consumption”,Harvard Business Review, No. 66, May, pp. 7-8.
Lichtenstein, D.R., Netemeyer, R.G. and Burton, S. (1990), “Distinguishing coupon proneness from
value consciousness: an acquisition-transaction utility theory perspective”,Journal of
Marketing, Vol. 54 No. 3, pp. 54-67.
Nunes, J.C., Dreze, X. and Han, Y.J. (2010), “Conspicuous consumption in a recession: toning it
down or turning it up?”,Journal of Consumer Psychology, Vol. 21 No. 2, pp. 199-205.
Ohmae, K. (1985), Triad Power: The Coming Shape of Global Competition, Free Press, New York, NY.
Ozsomer, A. and Simonin, B.L. (2004), “Marketing program standardization: a cross-country
exploration”,International Journal of Research in Marketing, Vol. 21 No. 4, pp. 397-419.
Quelch, J.A. and Jocz, K.E. (2009), “How to market in a downturn”,Harvard Business Review,
Vol. 87 No. 4, pp. 52-62.
Ritson, M. (2008), “Luxury stands its ground”,All Business on the Web, Vol. 3, pp. 11945324-1.
Robertson, R. (1995), “Glocalization: time-space and homogeneity-heterogeneity”, in Featherstone, M.,
Lash,S.andRobertson,R.(Eds),Global Modernities, Sage, London, pp. 25-44.
Roostal, I. (1963), “Standardization of advertising for Western Europe”,Journal of Marketing,Vol.27
No.4,pp.15-20.
Rosenbloom, S. (2009), “Costly, yes, but for you …”,The New York Times, Section B, August 1, p. 1.
428
JFMM
19,4
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)

Shocker, A.D., Srivastava, R. and Ruekert, R.W. (1994), “Challenges and opportunities facing
brand management: an introduction to the special issue”,Journal of Marketing Research,
Vol. 31, No. 2, pp. 149-158.
Silverstein, M., Fiske, N. and Butman, J. (2003), Trading up: The New American Luxury, Pengiun
Group, New York, NY.
Sproles, E.K. and Sproles, G.B. (1990), “Consumer decision-making styles as a function of
individual learning styles”,Journal of Consumer Affairs, Vol. 24 No. 1, pp. 134-147.
Steenkamp, J.B., Batra, R. and Alden, D.L. (2003), “How perceived brand globalness creates brand
value”,Journal of International Business Studies, Vol. 34 No. 1, pp. 53-65.
Thompson, C.J. and Arsel, Z. (2004), “The starbucks brandscape and consumers’(anticorporate)
experiences of glocalization”,Journal of Consumer Research, Vol. 31 No. 3, pp. 631-644.
Tungate, M. (2012), Fashion Brands: Branding Style from Armani to Zara, 3rd ed., Kogan Page
Limited, Great Britain.
Urwin, R. and Spanier, G. (2008), “Luxury is feeling chill of recession”The Evening Standard,
London, December 11.
Venezia, B. (2009), “It’s tough being rich in a recession”,Orange County Registry, January 9.
Vinelli, R. (2009), “Luxury shame: an emerging norm”, SSRN, available at: http://ssrn.com/
abstract¼1349341, http://dx.doi.org/10.2139/ssrn.1349341 (accessed January 2015).
Wiedmann, K.P., Hennigs, N. and Siebels, A. (2007), “Measuring consumers’luxury value
perception: a cross-cultural framework”,Academy of Marketing Science Review, Vol. 7
No. 7, pp. 333-361.
Wiedmann, K.P., Hennigs, N. and Siebels, A. (2009), “Valuebased segmentation of luxury
consumption behavior”,Psychology & Marketing, Vol. 26 No. 7, pp. 625-651.
Yeoman, I. (2011), “The changing behaviours of luxury consumption”,Journal of Revenue and
Pricing Management, Vol. 10 No. 1, pp. 47-50.
Zeithaml, V.A. (1988), “Consumer perceptions of price, quality and value: a means-end model and
synthesis of evidence”,Journal of Marketing, Vol. 52 No. 3, pp. 2-22.
Corresponding author
Melika Husić-Mehmedovićcan be contacted at: melika.husic@efsa.unsa.ba
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
429
Retaining the
allure of
luxury brands
Downloaded by Salah Hassan At 11:31 05 October 2015 (PT)