2.

1 Review of core concepts

Today, the twenty first century, luxury consumption has become so popular (Kapferer and
Bastien, 2009) despite the fact that there is a relatively small number of companies selling luxury
products. (Uche Okwonko, 2007) Everyone aspire for luxury, particularly in fashion. In fact,
there has been many luxury brands established in the world over the past centuries regardless of,
such as, the industrial revolution period, the first and second world wars, or democratization.
Until now, the period of globalization offers many sources of luxury. This is driven by the
development of industries, economy, new trades, increase in spending, and even communication.
For example, there are some popular Japanese luxury brands in European countries, there are
Asians addicted to European Luxury brands, and there are European luxury brands that uses
Chinese silk as raw materials in productions. (Kapferer and Bastien, 2009) Consequently, people
all

over

the

world

are

familiar

with

the

word

luxury

fashion

brands.

2.1.1 Relationship marketing

Customer Satisfaction has been in the spotlight amongst marketing, behavioral writers and
researchers for long. It is one of the most basic and inevitably a very significant business element
that cannot be avoided by organisations in modern times. The last three decades haveseen a
number of reports and research work in the area of customer satisfaction (E.g. Bolton,1995; Klee
and Thurau, 1997). The growing importance of customer satisfaction, customer retention,
changes in market demand, and competitive intensity has led to a paradigm shift from
transactional marketing to relationship marketing(Payne, 2009; Sheth and Parvatiyar, 1994). May

researchers argue that CRM has a significant impact on customer insight, satisfaction, customer
retention and loyalty e.g.(Ghavami & Olyaei, 2006; Lee-Kelley et al 2003).
With time, the markets matured, competition increased, customer demands and loyalty became
complex. Customers have gradually become less responsive aschoices have increased, facilitated
by globalisation and new marketing channels such as theInternet. These challenges,
technological developments in managing and maximizing thevalue of large chunks of data
propelled businesses and researchers in developing the concept
of Customer Relationship Marketing.

2.1.2 Customer services

CRM can ideally be described as: a move from functionally based to cross functionally
basedmarketing; a shift in focus from transactional marketing to relationship marketing; a
shiftfrom

marketing

activities

which

emphasize

customer

acquisition

to

marketing

activitieswhich emphasize customer retention as well as acquisition (Payne, 2009); a shift in

focusfrom treating customers simply as an audience to treating them as key assets of the
business.
Payne, 2009 identifies the key principles of CRM as: emphasizing on retaining Customers are
vital assets of organisations and are mostlyresponsible for the goodwill earned by the brand.
CRM seeks to treat customers asinvestments. By building on existing investment, in terms of
product development andcustomer acquisition costs, firms can generate potentially higher
revenue and profit at lowercost. Marketing on a transactional basis is proved to have greater
financial outlay and risk (Payne, 2009).

2.1.3 Luxury

Due to the fluidity of the concept, different people define luxury in different ways or forms.
Husband defined luxury fashion branded products as fashionable and high quality consumer
goods made by reputed luxury brands (Chandha & Husband, 2006, p. 106). This definition is
effective by the inclusion of a range of products such as clothes and leather goods where these
products are universally available and accepted as luxury products (Ahmed, et al., 2002).
According to Phau and Prendergast (2000), luxury represents much more nowadays; one of the
most significant changes is that it is on necessarily expensive, but by no means is it a necessity
(Brannen, 1996). Within the literature on luxury, McKinsey (1990) and Nueno & Quelch (1998)
defined luxury by the use of price and quality ratio. Whatever falls into the highest price and
quality ratio category is regarded as luxury. In addition, luxuries are by definition always out of
the reach of mass consumption (Berry, 1994) and exclusivity and rarity are therefore features
connected to the concept of luxury (Pantzalis, 1995).

Luxury is very selective and exclusive which there is almost the only brand in its product
category. The sense of being sophisticated and having a good taste are based on this definition.
The unique attribute of each product category belongs to one brand or it is called the icon.
Only one brand specializes in one product category, for example, Brioni for mens suits, Herms
for leather bags, Valentino for womens dress, and Guerlain for cosmetics. (Chevalier and
Mazzalovo, 2008) Although, the luxury industry is somehow small in terms of number of
companies in this world compared to other industries, luxury fashion industry has been a multibillion dollar industry in the world. It plays a remarkable role in the economy, and influences the

modern society. To add on this aspect, Chadha and Husband (2006) said that the democratization
of luxury brands during 90s made the door of exclusivity open to ordinary people. And, luxury is
everywhere

today

(Kapferer

and

Bastien,

2009).

2.2 Perceptions

2.2.1 Managers perceptions

3.4.1 Luxury products as a status symbol
As discussed above what a luxury brand is, it is perceived as a symbol or a message of showing
ones social status. Because of its value, the possession of luxury goods normally signifies the
owners economical status. Moreover, it is very common that people simply judge others based
on our perceptions. Wattanasuwan (2005) explains that ones appearance, gender, accent or outfit
sends a direct and powerful image to the perceivers. Consequently, people start to employ these
luxurious materials as a display of social status and their abilities to afford them; they have a
thought that the more they have, the higher perceived social level they can achieve
(Wattanasuwan, 2005). Dubois and Duquesne (2003) studied that the reason of consuming
luxury goods is primarily for their symbolic value.
3.4.2 Motivations
It is believed that ones desire can be a strong driving force. Schiffman and Lazar Kanuk
suggested that motivation is the driving force within individuals that leads to their actions
(Schiffman & Lazar, 1987). In this case, the motivation for their actions to purchase of luxury
goods is their unfulfilled needs or desires. Wells and Prensky (1996) commented that these
products act as a tool to satisfy their wants.

Buying to impress others was the traditional motives for purchasing luxury brands. However,
recent studies showed that personal orientation has been incorporated into consumption and it as
been gradually increasing worldwide (Bhat & Reddy, 1998 ).

2.2.2 Customer perceptions

In relation to these various ways of using luxury products, the following section presents
different dimensions that would show the different value perceptions of luxury consumers.
In 1998, Nueno and Quelch identified certain characteristics that are common within luxury
brands, which are the consistency of delivering a premium quality, the craftsmanship tradition,
the particular design or style that represents the brand and the maintenance of exclusivity by
producing goods in a limited quantity (Dubois & Laurent, 1994). In addition, there are several
common features among luxury brands that are sculpted by marketing strategies such as global
reputation, strong emphasis on the country of origin of the brand, the creation of emotional
appeal towards the brand and the creation of uniqueness of the product (Chadha & Husband,
2006). Many of these characteristics were verified by Dubois, Laurent and Czellar (2001) who
conducted qualitative interviews with consumers. The authors identified six dimensions of
luxury, including:
3.3.4.1 Excellent quality
Dubois et al., (2000) stated that importance of quality reassurance provided to customers by
luxury brands. It is reasonable to receive a certain level of product reliability when paying a
superior value (Dubois et al., 2000).
3.3.4.2 Very high price

Another point mentioned was that they are normally priced at a superior amount. The reason that
this category is defined as luxurious is that they are not commonly accessible by a major portion
of the community. The marked price plays a crucial role in determining the boundary where
luxury products are situated in the society.
3.3.4.3 Scarcity and uniqueness
Exclusivity offered by luxury brands are often well used in marketing promotions and the
concept is also well documented (Pantzalis, 1995). Product uniqueness is one of the critical
features in developing a brands characteristics and the image sending to consumers. The rarer or
more unique the product is the more value it symbolizes, at least in a consumers perception. The
Birkin Bag made by Hermes is a good example.
3.3.4.4 Aesthetics and polysensuality
The consumption of luxury goods or services no longer only materialistic but also a pursuit of
pleasurable experience (Chaudhuri & Majumdar, 2006). Consumers are well aware of this
psychological satisfaction and Danziger (2005) called it a psychographic aspect of luxury.
3.3.4.5 Ancestral heritage and personal history
Time is also a good testimony for successful luxury brands. Kapferer (1998) suggested that the
sustainability throughout the years can be a proof of quality guarantee and reliability. Haubl and
Elrod (1999) pointed out that ones emotion can be a trigger to product purchase.
3.3.4.6 Superfluousness
Superfluousness is becoming more common in luxury consumption in which it represents an
indulgence of owning these goods but concerning a different outcome rather than make use of
the goods such as the underlying intangible benefits (McCracken, 1988). McCracken (1998) also

explained that these six dimensions are interconnected; the level of importance of each
dimension depends on the consumer.
This six-dimension model was widely used in academic research on luxury consumption and has
been re-tested in a number of cultural studies by other scholars. DeBarnier et al., (2006) found
out that the variations appeared on the validity test of the model are mainly due to cultural
factors and the gradual change of consumer behaviour. On the other hand, Vigneron and Johnson
(2009) brought along another model with five values. After comparison with the one suggested
by

Dubois

et

al.,

there

are

common

factors

between

the

2.2.3 Gap analysis

2.3 Relationship marketing for customer services

The CRM Value Cycle
Chu and Pike, 2002 say that CRM is about providing a one-to-one personalized service toeach
customer in order to enhance the customer experience. They proposed anotherframework that
addressed certain shortcomings of the previous models and frameworks. Thisframework was
specifically proposed as a generic solution for retailers. Actual case studiesof retailers were used
by them in the development of this framework.Fig.3.2. the CRM Value Cycle Source: Adapted
from Chu & Pike, 2002

The darker half (Refined Business Actions and Customer Insights) of the cycle shows the roleof
CRM with the customer insights referring to the analysis of customer information also

known as Analytical CRM and the refined business actions that involves t
aking steps to
improve their competencies in dealing with customers also called as operational CRM. The
strategic capabilities are important in providing organisations with competitive advantage. These
strategic capabilities can derive from architecture, people, processes, reputation, technology and
innovation. The architecture derives from the relational contracts of theorganisation which are
hard to imitate by the competitors. Strategic capabilities are uniqueresources or competencies
that the organisation needs to invest in and sustain for competitiveadvantage (Based on the
resource based view, core competencies and strategic assets byBarney, 1991; Hamel and
Prahalad, 1990; Amit and Schoemaker, 1993 respectively).CRM is a strategic business process
that has proved to give many organisations thecompetitive advantage in their industry (e.g.
Tesco, Rolex etc.).