BERNARD DUBOISANDCLAIRE PATERNAULT

OBSERVATIONS:UNDERSTANDING THEWORLD OF INTERNATIONALLUXURY BRANDS:THE "DREAM FORMULA"Marketing luxury goods is a paradox. Managers want a certain levelof diffusion for their brand in order to achieve success in the mar-ketplace; yet, if their brand is overdiffused, it loses its luxury char-acter. This paper empirically explores the status of international lux-ury brands in the United States.

In spite of its spectaculargrowth over the last 20years, the market for luxurygoods, estimated at $60 billionby McKinsey Corp. (1990), keepsits secrets. Although brandnames and products are highlyvisible given their strong mediacoverage, the processes accord-ing to which consumers acquireand consume luxury items re-main enigmatic. It seems partic-ularly difficult to explain andpredict the conditions underwhich "dreams" of luxuryemerge and how such dreamsmaterialize into purchase acts.While for other high-involve-ment products, time-honoredrational models such as theAIDA {Strong, 1925) or Hierar-chy-of-Effects (Lavidge andSteiner, 1961) sequences haveproven useful for understandingthe stages buyers go through,the mechanisms underlying con-sumers' reactions to luxurygoods, often described as impul-sive, emotional, or "extrava-gant," seem hidden in an im-penetrable black box.

The purpose of this article isto present the results of a studyaimed at better understandingsuch mechanisms in the contextof international luxury brands.While past research has investi-gated such topics as the con-

sumption habits of the affluent(Stanley, 1988, 1991; ResearchAlert, 1991), the competitivestructure of luxury markets(Dubois and Duquesne, 1993), orstatus brand adopters' sociode-mographic and psychographiccharacteristics (Andrus, Silver,and Johnson, 1986; Jolson,Anderson, and Leber, 1981), noprior work has been published,to the best of our knowledge, onthe specific issue of the sequenceof stages luxury brands gothrough before being fully ac-cepted by consumers. Given thislack of research, few a priori as-sumptions could be developedabout the nature of these rela-tionships. Of course, one logi-cally anticipates that being awareof a brand is a prerequisite todreaming and purchasing.Awareness, therefore, should beconsidered an early step in thedevelopment of a relationshipbetween a consumer and a lux-ury brand. The relationship be-tween dream and purchase,however, is more equivocal. Fol-lowing the generalization princi-ple (McSweeney and Bierley,1984), one could argue that buy-ing a luxury-branded item, forexample, a fashion accessory,activates the dream and desire torepurchase thereby leading tothe acquisition of a collection of

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products bearing the same pres-tigious name. But, in line withthose who believe in the damp-ening effect of purchase on atti-tude (for a review of the atti-tude-behavior controversy, seePetty, Unnava, and Strathman,1991, and also Pinson and Ro-berto, 1973), one could just aswell assert that by making thedream come true, the purchaseact itself takes away some of theinaccessible and therefore luxurynature of the brand. Which oneof these two conflicting hypothe-ses is best supported by empiri-cal evidence?

Method

The results to be presentedhave been obtained from a re-cent survey undertaken in theUnited States by the Interna-tional Research Institute on So-cial Change (RISC). RISC is aconsultancy group based inSwitzerland and active in 17 ofthe world major markets. In1990, RISC decided to launch aspecific research program onluxury goods. A representativesample of the U.S. population(aged 15 years and over) wasestablished and is now inter-viewed each fall. The results tobe presented come from the 1991survey. In order to ensure sam-ple representativeness, themethod adopted was probabilitysampling. The process actuallyinvolves two stages using a self-updating telephone generatedsample: (1) random selection of200 PSUs (Primary SamplingUnits) to obtain a balanced geo-graphic dispersion, and (2) ran-dom selection of starting pointsand calculation of the samplinginterval within each PSU. Thisprocedure accommodates thedramatic shifts in household dis-tribution between the 1980 and1990 published census. Further-

more, it is balanced to accountfor disproportionality of listedphone numbers in one area ver-sus another.

In total, 3,000 people were in-terviewed in person, at home,using a combination of self-com-pleted and face-to-face ques-tions. Respondents were askedabout their acquisition habitsand feelings relative to a set of34 luxury brands (see Table 1).The list was developed on thebasis of answers obtained to anunaided awareness test. A widevariety of sectors are represented(perfume, jewelry, fashion,leather goods, alcoholic bever-ages, hi-fi equipment, etc.). Thelist contains about as manyFrench as non-French brands,which is consistent with the esti-mated 50 percent market shareenjoyed by French brand namesin the worldwide luxury market(McKinsey, 1990).

Specifically, three measureswere taken in relation to eachbrand:

Aided awareness:Here is a list of luxury brands.Please indicate which onesyou know at least by name.

Recent purchase:Please indicate from whichyou have bought an item dur-ing the past two years.

Dream value:Imagine that you are given thepossibility of choosing a beau-tiful present because you wona contest. Which are the fivebrands you would like thebest?

It should be noted that allmeasures were taken at thebrand level rather than for anyparticular product category. Al-though the product category hasan obvious impact on purchaseand possibly dream levels, work-ing with brand names only is in

Table 1List of InternationalLuxury Brands

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

Armani

Laura Ashley

Bang & Olufsen

Bulgari

Cartier

Pierre Card in

Chanel

Chivas Regal

Christofle

Daum

Christian Dior

Dunhill

Givenchy

Gorham

Gucci

Guerlain

Hermes

Lacoste

Lancome

Lanvin

Estee Lauder

Ralph Lauren

Lenox

Montbtanc

Omega

Oscar De La Renta

Remy Martin

Revlon

Rolex

Shiseido

Louis Vuitton

Waterford

Waterman

Yves Saint-Laurent

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Figure 1

Awareness and Purchase Scores

40

35 -

30 -

Pur

chas

eo

at

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16 3010 93 | 4 17 1

^^ 201224

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-H10 20 30 40 50

Awareness60 70 80 90 100

line with the view, widelyshared in the luxury sector, thatwhatever their nature and price,all products sold under the samebrand name share a symbolicidentity and a core of values ex-pressing the "quintessence" ofthat brand. Whether they areautomobiles, wristwatches, writ-ing instruments, or sunglasses,all Porsche items express thePorsche "legend" and are clearlyidentified as such. Most if not allconsumers do not buy a Porschewristwatch because it is a goodand reliable watch but becauseof the Porsche name and what itmay stand for: sports look, so-phisticated design, German ori-gin, etc. More than other prod-ucts, luxury items are bought forwhat they mean, beyond whatthey are. Such a belief is thevery foundation for brand-exten-

sion strategies, so extensivelyused in the luxury sector (Aakerand Keller, 1990).

While the awareness and pur-chase indicators used in this re-search are rather standard, the"dream value" measure perhapsdeserves additional comment.When consumers are asked todescribe their spontaneous asso-ciations with the concept of lux-ury, the theme of "dream" al-most inevitably emerges. In arecent consumer survey, only 36percent of respondents dis-agreed with the item, "Luxurymakes me dream," while 24 per-cent strongly agreed with thatstatement (Dubois and Laurent,1994). Given the pervasive na-ture of such a theme, we felt itwas important to include suchan elusive concept in our analy-sis. We did not want to use

a purchase-interest measuresuch as an intention-to-buy indi-cator because we suspected thatanswers would have been toomuch under the influence of in-hibiting factors such as the lackof financial abilities. We wantedpeople to freely express theirpreferences, hence the referenceto a gift environment. We lim-ited the list to five brands to putconsumers in a situation wherethey are to make choices. Wefelt that, without a limit, the"wish list" for luxury brandsmight have been rather long, atleast for some consumers, and inthe end not clearly differentiablefrom an evoked set measure.We recognize that this is notthe only way to operationalizethe "dream value" conceptwhich certainly deserves furtherinvestigation.

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Figure 2

Relationship between Awareness and Dream

50 -|

45 -

40 -

35 -

30 -

=

5

20 -

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0 -3 4 16 1

10 9 1' .

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" 19

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11

5 21

22 7 2

1 1 1

I 1 110 20 30 40 50

Awareness60 70 BO 90 100

Results

Figure 1 shows the scores ob-tained for awareness and pur-chase as well as their relation-ship. The level of awareness inthe United States varies from 5percent (Daum) to 92 percent(Revlon) and the purchase levelfrom 0.4 percent (Bulgari) to40.9 percent (Revlon). As ex-pected, the relationship betweenawareness and purchase israther strong. Few people buyluxury names they do not knowand the penetration level of abrand is strongly affected by itsawareness score. The correla-tion coefficient (79 percent)indicates that 62 percent (79percent squared) of the variationin diffusion levels is due toawareness.

Figure 2 reveals an eventighter relationship between

awareness and dream, eventhough many brand names nowoccupy different positions on themap. The correlation coefficientbecomes 84 percent, whichmeans that 71 percent of thevariation in dream levels is dueto awareness. However, interest-ingly enough, the relationshipbetween purchase and dream ismuch more tenuous since only25 percent of the dream varianceis accounted for. How can weexplain such results?

Actually, the purchase-dreamrelationship is difficult to assessdirectly since both phenomenaare "contaminated" by aware-ness. In order to understand itbetter, one has to "remove"the influence of awareness.Among other methods, this canbe done through partial correla-tion analysis.

When awareness is "con-

trolled for," the relationship be-comes negative (regression coef-ficient = -0.5), which indicatesthat the level of diffusion of aluxury brand adversely affects its"dream" appeal. This conclusiongives empirical support to thewell-known "rarity principle"underlying conspicuous con-sumption (Veblen, 1899; Mason,1981) that luxury products areperceived by consumers as rareproducts; when overdiffused,they gradually lose their luxurycharacter.

The previously established re-sults can be summarized bymeans of the direct relationshipbetween awareness, purchase,and dream, obtained from multi-ple regression. Applied here, thismethod not only shows an excel-lent adjustment to the empiricaldata (coefficient of multiple deter-mination = 0.78) but also leads to

72 Journal of ADVERTISING RESEARCHJULY/AUGUST 1995

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Figure 3

Awareness-Purchase-Dream Relationship

DREAM

20

10

PURCHASE

20

AWARENESS

a regression equation revealingthe "dream formula":

DREAM = 0.58*AWARENESS- 0.59*PURCHASE -8.6

It should be noted that, in thisformula, the awareness coeffi-cient is positive while the pur-chase coefficient is negative.Both of them are statistically sig-nificant (see the Appendix).Such a result has also been ob-tained in five major Europeancountries (RISC, 1991). In theworld of luxury brands, it there-fore looks as if awareness feedsdream but purchase makesdream come true and therefore

contributes to destroy it. This isthe essence of the paradoxicalnature of the marketing of lux-ury goods. For many productcategories, marketing means in-creasing demand. In the case ofluxury, the challenge is to de-velop the brand without jeopar-dizing its appeal, largely basedon its limited diffusion level.

Managerial Implications

Each luxury brand can now bepositioned in terms of theawareness-purchase-dream rela-tionship. This is done in Figure3. To facilitate readability. Figure3 has been transformed into Fig-

ure 4 in which the X axis hasbeen redefined as: Awarenessminus Purchase (to allow a two-dimensional representation)while the Y axis indicates thedream level. The regressionequation enables us to calculatefor each brand its "expecteddream/' i.e., the dream level thebrand "deserves" given itsawareness and purchase levels.It is roughly equivalent to halfthe difference between theawareness and purchase scores.

If many luxury brands appearto have a "normal" or close tonormal dream level, some othersenjoy a "premium" or, on thecontrary, suffer from a "dream

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Figure 4

Awareness Minus Purchase80 -r

70 - -

29

10 20 30 40 50 60Awareness - Purchase

70 90

deficit." In the United States,Rolex obviously belongs to theformer group and Omega to thelatter. Interestingly enough, bothbrands are Swiss and active inthe same product category.

If one remembers that thedream potential of a brand isaffected by awareness (posi-tively) and diffusion (nega-tively), four situations actuallyemerge, all of them having dif-ferent managerial impHcations.

In some cases (situation 1), thedesire for the brand is limitedsimply because the awareness islow. Many brands in our sampleare faced with this problem inthe United States: Daum, Chris-tofle, Bulgari, Bang & Olufsen,among others. In this case, themanagerial recommendation isclear: Awareness has to be de-veloped first. Sponsoring activi-ties, celebrity endorsements, aswell as "special event manage-ment" (Catherwood and VanKirk, 1992) can be very helpful.

For example, in 1989, as part ofthe celebration of the Frenchrevolution bicentennial, the Co-mite Colbert members, who in-clude well-known luxury names(Chanel, Dior, Lacoste) but alsomany lesser known companies,decided to organize a series ofevents in New York, including afour-month exhibition on FrenchArt de Vivre at the Cooper-Flewitt museum, a Colbert Festi-val on Madison Avenue, and aBergdorf-Goodman exhibit ofunique pieces from privatecollections.

In some other cases (situation2), the awareness is good butthe desire is below expectations,primarily because the purchaselevel is already high. In theUnited States, this would seemto be the case for Yves SaintLaurent, for example. In such asituation, one should refrainfrom excessive licensing andmaintain highly selective distri-bution channels in order to pro-

tect the brand equity. An inter-esting example of such a tightchannel management strategy isprovided by Louis Vuittonwhose policy is to control distri-bution through direct ownership(or 51 percent joint ventures) ofpoints of sale.

Situation 3 describes just theopposite scenario. The aware-ness level is not necessarily veryhigh, relatively speaking, but thelevel of purchase is low enoughto entertain fascination. Water-ford would seem to be in such aposition. The prospects for de-velopment are good provided acareful expansion strategy isadopted.

Finally (situation 4), the stars:very strong awareness andhighly controlled diffusion. Asalready mentioned, Rolex exem-plifies this situation in theUnited States. It should be notedthat Roiex also has carefullyavoided hazardous diversifica-tions. Another excellent example

74 Journal of ADVERTISING RESEARCH^JULY/AUGUST 1995

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of a successful diffusion manage-ment strategy is provided by DeBeers. By limiting the number of"sight-holders" (buyers) to about200 people worldwide, decidingto sell less rough diamondswhen the prices go down andmore when they go up, the DeBeers company has been able formore than 60 years to managethe delicate equilibrium betweensupply and demand in the entirediamond industry.

Conclusion

In highlighting the structuralrelationship between awareness,purchase, and dream, this articleprovides luxury-goods compa-nies with a simple yet opera-tional tool that enables them todiagnose the competitivestrength of their brands in anyone of their markets. Althoughthe results presented here con-cerned the whole U.S. popula-tion, the same type of analysisobviously can be developed forany relevant segment or subseg-ment. In dissecting the relation-ship, the article also underscoresthe paradox inherent in manag-ing luxury products. The path isnarrow between the sterility ofmalthusianism and the excessesof mass marketing. Every year,many small luxury-goods com-panies disappear or lose theirindependence due to not havingbeen able to exploit a name keptconfidential. Others lose theiridentity and character in tryingto expand too quickly. The best-managed companies learn howto turn the paradox to their ad-vantage. They position them-selves at the intersection of twosegments, one of authenticityand the quest for absolute qual-ity, and the other of role modelsand social codes. Their branddraws its fascination for onegroup from the legitimacy givenit by the other.

Appendix (The interested reader will find below the full regressionresults:)Analysis of Variance for the Regression

Source of Degrees of Sum of Meanvariation freedom squares square

Due to regression

Deviations about reg.

Total

Sample R2Adjusted R2Std errorIntercept

VariablesAwarenessPurchase

.79

.775.91

-8.6

Mean44.68.25

2

31

33

Standarddeviation

25.59.2

3973

1082

5055

1966,88

34.93

Regressioncoefficient

0.58-0.59

56.88

Standarderror0.0660.182

Note: To the extent that awareness and purchase are related to each other, some multicollin-earity is necessarily present in our data. What constitutes "serious multicoliinearity" Is open todebate among specialists. In their authoritative book on marketing research, Green and Tullsuggest various rules of thumb for assessing the amount of serious multicoltinearity: Thepredictors should not correlate more than 0.9 (they correlate here 0.79) and the determinant ofthe correlation matrix (0,4 here) should not be "too close" to zero. Furthermore, multicoliin-earity only reduces the precision of estimating the coefficient of the regression equation but inno way affects the predictive power of the relationship. Here both regression coefficients arestatistically significant as their f-value (8.77 and -3.22, respectively) indicate.

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Index of Advertisers

American Marketing Association page 18The Burke Institute Cover 4Ennis Associates, Inc page 3MacroAHF Marketing Research and Consultancy Cover 2The Market Research Society page 34Terra Research and Computing page 8Video Storyboard Tests page 1

76 Journal of ADVERTISING RESEARCHJULY/AUGUST 1995