Co-Creating Value for Luxury Brands

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Co-creating value for luxury brandsCaroline Tynan , Sally McKechnie, Celine ChhuonNottingham University Business School, UK

a b s t r a c ta r t i c l e i n f o

Article history:Received 1 July 2008Received in revised form 1 January 2009Accepted 1 August 2009

Keywords:ValueCo-creationTypes of valueCustomer value frameworkLuxury brands

The global market for luxury brands has witnessed dramatic growth over the last two decades but thecurrent challenging economic environment contributes to the dif culty brand owners experience in ensuringthat customers perceive suf cient value in their luxury brands to compensate for the high prices. According

to recent service-oriented research, customers and suppliers co-create value as a result of a shift from a

rm-and product-centric view of value creation to one that focuses on personalized brand experiences. In thispaper, the authors develop a theoretical framework of types of value for luxury brands, and use case studyresearch to identify processes of value creation in this particular setting. The ndings highlight the variety of interactions taking place between luxury brand owners, their customers and members of their respectivenetworks, which help to differentiate luxury brands and co-create a superior value proposition.

2009 Elsevier Inc. All rights reserved.

1. Introduction

The global market for luxury brands has grown rapidly over thepast two decades. Estimated to be worth $263billion in 2007 whichrepresents a 31% increase over the past ve years, predictions indicatea 71% growth over the next ve years, largely fueled by high demandfrom emerging economies ( Verdict, 2007 ). In Britain, consumerexpenditure on luxury goods increased by 50% between 1994 and2004 compared to a 7% increase for non-luxuries ( Keane andMcMillan, 2004 ) whereas in France the luxury fashion sector aloneis the fourth largest revenue generator ( Okonkwo, 2007 , p.1). Thisphenomenal rate of growth and challenges inherent in marketingluxury brands ensure that practitioners and recently academics regu-larly examine and analyse the marketplace. Although luxury con-sumer demand in the West appears to be waning due to the creditcrunch, property crash and a slowing world economy ( Teather, 2008 ),the appetite for luxury brands is growing elsewhere in the emergingeconomies of China, India, Asia, the Middle East and Latin America(Verdict, 2007; Chadha and Husband, 2006 ).

Themarketing of luxurygoods requires a ne balancingact to satisfythe increasing demand in the global marketplace, while safeguardingthe brands' cachetand exclusivity in the face of challenges from theriseof counterfeiting ( Bian and Veloutsou, 2007 ), parallel imports, brandoverextensions, and adoptionby members of inappropriate subcultures(Bothwell, 2005 ). Luxury goods marketing is complex and frequentlycounter-intuitive to the extent that Bastien and Kapferer (2009, p.2)state that classical marketing is the surest way to fail in the luxury

business . Successful luxury goods marketing requires the customer toperceive suf cient value in the luxury good to compensate for the highprice charged, particularly in times of recession. Therefore, understand-ing the types of value sought and the processes of value co-creation isimportant.

In light of the above, this paper addresses the nature of value forluxury brands and the ways in which value co-creation takes place.The authors seek to explore conceptually the meaning of value forluxury brands, and empirically investigate how rms and consumersco-create value in the luxury market. The paper proceeds rst byreviewing the conceptualization of brands in general and luxurybrands speci cally, then developing a theoretical framework of typesof customer value for the luxury market. Next, the authors outline theresearch methodology employed and discuss key ndings from theempirical analysis of types of value for luxury brands, the nature of the valuecreation network and processes of valueco-creation. Finally,the paper draws conclusions, considers managerial implications andoffers suggestions to enableluxury brand owners to keep in tune withtheir customer base and differentiate themselves more effectively.

2. Conceptualizing the brand

Although the academic and practitioner branding literature isextensive, nding a universally accepted de nition of theterm brand

remains elusive. As a result of the multifaceted nature of the concept amultiplicity of de nitions and contextualized understandings of itsoperationalization exist ( Gabbott and Jevons, 2009; Jevons, 2007;Brodie et al., 2006 ). The recent developments of two classi cationschemes for brand conceptualization using historical analyses ( Jevons,2007; Stern, 2006 ) form the basis of further work ( Buchanan-Oliveret al., 2008 ). By applying the historical-analysis method to multiple

Journal of Business Research 63 (2010) 1156 1163

Corresponding author. Nottingham University Business School, Jubilee Campus,Nottingham NG8 1BB, UK. Tel.: +44 115 846 6978.

E-mail address: [email protected] (C. Tynan).

0148-2963/$ see front matter 2009 Elsevier Inc. All rights reserved.

doi: 10.1016/j.jbusres.2009.10.012

Contents lists available at ScienceDirect

Journal of Business Research
mailto:[email protected]://dx.doi.org/10.1016/j.jbusres.2009.10.012http://www.sciencedirect.com/science/journal/01482963http://www.sciencedirect.com/science/journal/01482963http://dx.doi.org/10.1016/j.jbusres.2009.10.012mailto:[email protected]


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meanings of the term brand , Stern (2006) proposes a quadripartiteclassi cation scheme which categorizes the construct according tonature (literal and metaphoric), function (entity and process), locus(world and mind) and valence (positive and negative). Jevons (2007)alternatively traces the development of brand de nitions through ahistorical meta-analysis and identi es six key components of brandde nitions in his review (i.e. identity, functionality, symbol(ism),sustainability, differentiation, and value creation/delivery). He incor-

porates them into the following integrated de nition:

A brand is atangible or intangible concept that uniquely identi es an offering,providing symbolic communication of functionality and differentia-tion, and in doing so sustainably in uences the value offered.

According to Buchanan-Oliver et al. (2008) , having so many key com-ponents renders thisclassi cationunnecessarilycomplicatedand there-fore they con ate the classi cation to three components (i.e. symbolic,functional and psychological). They also argue that Jevons' (2007)classi cationdoes not satisfactorily capture the experiential componentof de Chernatony's (2002) brand de nition. After applying a combinedclassi cation scheme for brand conceptualization based on con ated Jevons (2007) and Stern (2006) to their own analysis of contemporarybrand perspectives, they conclude the need to address the experientialdimension of the brand as well.

3. Conceptualizing the luxury brand

Traditionally, much of the academic literature on luxury goodscomes from a variety of disciplines such as history (e.g. Berry, 1994 ),economics (e.g. Leibenstein, 1950; Veblen, 1899 ) and sociology (e.g.Bourdieu, 1984 ). However, a growing level of interest in the market-ing literature exists ( Truong et al., 2008 ) across a variety of areas: thenature and de nition of luxury goods ( Vigneron and Johnson, 1999,2004; Catry 2003; Vickers and Renand, 2003; Dubois and Czellar,2002; Nueno and Quelch, 1998; Kapferer, 1997; Dubois andDuquesne, 1993; Veblen 1899 ); competitive structure of luxury mar-kets ( Chadha and Husband, 2006; Dubois and Duquesne, 1993 );issues relating to the democratization of luxury ( Luxury Institute2007; Twitchell 2002 ) such as extending the market while retainingthe luxury cachet (e.g. Giacalone, 2006; Catry, 2003; Silverstein andFiske, 2003; Dubois and Czellar, 2002; Nueno and Quelch, 1998 ) andtrading up for luxury goods ( Silverstein and Fiske, 2003, 2007 ); mar-ket segmentation ( Dubois et al., 2005; Dubois and Duquesne, 1993 );conspicuous consumption ( Truong et al., 2008; O'Cass and McEwen,2004 ) as opposed to prestige-seeking consumer behavior ( Vigneronand Johnson, 1999 ); online presence for luxury brand marketing(Dall'Olmo Riley and Lacroix, 2003; Kapferer, 1997, 2000 ); counter-feiting ( Bian and Veloutsou, 2007; Giacalone, 2006 ), and the meaningof luxury goods. However, in spite of this broad literature on theluxury market, researchers have yet to address the meaning of valueand the value creation process for luxury brands.

Understanding the nature of value for luxury goods requires con-

sideration of what constitutes a luxury brand. De ning luxury goodsor brands is dif cult ( Vigneron and Johnson, 1999; Dubois andDuquesne, 1993 ). Luxury goods exist at one end of a continuum withordinary goods, so where the ordinary ends and luxury starts is amatter of degree as judged by consumers. Sekora de nes luxury as anything unneeded (1977, p. 23) , which is set in the context of whatsociety considers necessary and is thus a relative and dynamic term(Berry, 1994 ). The roots of the word luxury derive luxury fromluxus , which according to the Oxford Latin Dictionary (1992) meanssoft or extravagant living, (over)-indulgence and sumptuousness,luxuriousness, opulence , but the term luxury is currently and com-monly used by marketers in most product or service categories tocommunicate to consumers a particular tier of offer ( Dubois et al.,2005 ) in order to persuade them to trade up . In addition, new terms

are emerging in the practitioner literature such as

old luxury

being

about the good itself and de ned by the company and new luxury

being experiential and de ned by the consumer ( Florin et al., 2007 ).Marketing academics are using luxury in different ways: for

example, Vigneron and Johnson (1999) use luxury to describe thevery top category of prestige brands, whereas Dubois and Czellar(2002) view prestige to stem from a unique accomplishment inthe brand and luxury to merely concern self-indulgence. Economistsde ne luxury goods as goods for which demand rises either in

proportion with income or in greater proportion than income (i.e.where the income elasticity of demand is equal to or greater than 1),but clearly the purchase of luxury goods is not governed simply byeconomic factors ( Dubois and Duquesne, 1993 ), as income is a nec-essary but not suf cient condition to explain purchase. By examiningthe motivation for consumers to purchase luxury goods within asocio-economic context, Veblen's seminal work (1899, 1994) pro-poses that individuals from the wealthy leisure class engage inconspicuous consumption when purchasing high priced items inorder to ostentatiously communicate wealth and achieve social status(Bagwell and Bernheim,1996 ). This view is consistent with Leibenstein(1950) , whose examination of this phenomenon identi es the Veblen

effectwhereby demandfora goodrisesbecause itsprice is higher ratherthan lower, plus two forms of interpersonal effects of conspicuousconsumption: the snob effect, where thedemand for a good falls as thenumber of buyers increases, since snobs desire to be different andexclusive and therefore disassociate themselves from the masses; andthe bandwagon effect, where demand for a good increases becauseconsumers follow others in their reference groups who have alreadybought the good. O'Cass and McEwen (2004) however voice concernsover the interchangeable use in the literature of the terms conspicuousconsumption and status consumption . According to them, the formerrelatesto thedesiresof consumersto gain prestige by purchasingstatus-laden products and brands of public or private display, whereas thelatter refers to the visual public display or overt usage of products.

As a result of Belk's (1988) work on the extended self, whichhighlights the importance of possessions in contemporary consump-tion and consumers' feelings about them as a key contributor andre ection of their identities, luxury goods researchers (such asVigneron and Johnson (1999) ) recognise that consumers can derivesubjective intangible bene ts from these goods beyond theirfunctional utility, while additional motivations to purchase theminclude their higher levels of quality ( Garfein, 1989 ) and authenticity(Beverland, 2006 ).

In Vigneron and Johnson's (1999) review of prestige-seeking con-sumer behavior they separate interpersonal effects on prestige con-sumption from personal effects, and conceptualize ve types of perceived value for prestige goods: namely three types of interper-sonal effects (i.e. the Veblen effect for perceived conspicuous value;the snob effect for perceived unique value; and the bandwagon effectfor perceived social value) and two types of personal effects (i.e. thehedonic effect for perceived emotional value and the perfectionismeffect for perceived quality value). Followingfurther work, they revise

this classi cation by switching around the bandwagon effect to apersonal effect and the perfectionism effect to an interpersonal effect(Vigneron and Johnson, 2004 ). The authors can see arguments forboth of these positions, especially in considering the behavior of global consumers.

Catry(2003) argues for the possible replacement of actual scarcity,once considered essential to the existence of a luxury good, by thenotion of perceived rarity maintained through rare ingredients orcomponents in the short term, or sustainably through strategies of techno-rarity enabled by innovation, limited editions or informationbased rarity.

An alternative approach to conceptualising consumer perceptionsof luxury goods from Vickers and Renand (2003) considers luxurygoods as symbols of personal and social identity and seems to ful ll

calls from Jevons (2007) and Buchanan-Oliver et al. (2008) to take an

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integrative perspective on brand de nition. They propose differenti-ating between luxury and non-luxury goods in terms of the mix of their components on three dimensions: functionalism, experiential-ism and symbolic interactionism. Therefore, the key identi ers of luxury brands adopted in this study are high quality, expensive andnon-essential products and services that appear to be rare, exclusive,prestigious, and authentic and offer high levels of symbolic andemotional/hedonic values through customer experiences. In short,

evidence of luxury brand de nitions from each of the four brandperspectives (i.e. symbolic, functional, psychological, and experien-tial), which Buchanan-Oliver et al. (2008) identify, exists.

4. Co-creation of value

Authors such as Payne et al. (2009), Prahalad and Ramaswamy(2004) and Vargo and Lusch (2004) argue that the rm does notcreate and deliver value to the passive customer, but rather throughinteraction and dialogue embeds value in the co-creation processbetween the rm and its active customer. This moves the focus of marketing to a process of co-creating value through the exchange of knowledge and skills with customers and partners ( Vargo and Lusch,2004 ) to co-construct unique experiences ( Prahalad and Ramaswamy,2004 ), that is developing a service orientation predicated onprocesses of joint value creation ( Vargo and Lusch 2004, 2008 ).Nevertheless, the academy does not yet understand the processes of value creation and recent studies overlook the creation of the serviceexperience ( Schembri, 2006 ). Pealoza and Venkatesh (2006)recommend that researchers should study markets as social con-structions to examine those multiple perspectives of meaning whichcreate value for the customer.

These new understandings emphasizing the importance of valueco-creation are particularly important for this study of value co-creation in the luxury goods market. While value is a central conceptin marketing ( Payne and Holt, 2001 ), Woodruff and Flint (2006) callfor the development of a better understanding of customer value. Thefocus of traditional marketing is the rm-centered notion of value inexchange, that is making a value proposition for the passive customerto accept or decline ( Prahalad and Ramaswamy, 2004 ). Recent studieshowever, emphasize the co-creation of value by the supplier and the connected, empowered and active customer (Prahalad and Ramas-wamy, 2004 , p.8), who determines value uniquely and phenomeno-logically (Vargo and Lusch, 2008 , p. 7) duringconsumption. Thus, theconcept of value-in-use supersedes that of value in exchange ( Luschand Vargo, 2006 ) and suggests the use of marketing approaches,which are experiential, interactive, progressive, evolving and exible(Tynan and McKechnie, 2009 ).

The customer and the supplier co-create value at multiple pointsof interaction (Prahalad and Ramaswamy, 2004 , p. 13) through co-creation experiences which take place throughout the life of theservice and not just at the point of exchange. These value-creating

interactions can include other members of the customer's and thesupplier's network (e.g. members of brand communities, share-holders, or partners of the supplier). Prahalad and Ramaswamy(2004) see the experience being the brand and identify co-creation astaking place and evolving through personalized experiences in whichthe customer is an active partner. By taking an experience-centricview further, Schmitt (2003) asserts that Experience Marketing candeliver sensory, emotional, cognitive, behavioural and relational valueto customers to which Tynan and McKechnie (2009) add social andinformational based value. To be successful, Poulsson and Kale (2004)argue that a marketing experience should have personal relevancefor the customer, be novel, offer an element of surprise, engenderlearning and engage the customer. This recognition that the branddoes indeed have an experiential component and that the experience

of the brand involves an interactive process between the customer,

supplier and their networks contributes to understanding of the co-creation of value.

5. The framework development process

This current study speci cally addresses the gap within the lit-erature on the nature and co-creation of value in the luxury market.Having reviewed the literature on what constitutes a luxury brand,

greater attention is now required to understand how customersinteract with, and experience, the luxury brand. Smith and Colgate(2007) offer an innovative and useful general theoretical frameworkof customer value creation, which led to authors to explore the typesof value they identify. Their framework includes types of value (i.e.functional/instrumental value, experiential/hedonic value, symbolic/expressive value, and cost/sacri ce value) plus sources of value (i.e.information, products, interaction, environment, ownership/posses-sion transfer), and as this framework is generic in nature its appli-cation for luxury goods requires further development.

Initially, to accommodate the types of value identi edby Vigneronand Johnson (1999, 2004) the authors classify Veblen, snob, band-wagon, and perfectionism effects as symbolic/expressive value,hedoniceffects as experiential/hedonic value and perfectionism effects as cost/sacri cevalue.Next,the authorsclassify theworkof Vickers andRenand(2003) on personal and social symbolic meanings as relating tosymbolic/expressive value. However, to extend the framework for thistype of valuein the luxury context, theauthors believe that they shoulddraw a distinction between meanings of an outer- and self-directednature. Finally, noting that Smith and Colgate (2007) indicate how theyclassify Holbrook's (1999) customer value types in the framework, andconsultingthe original typology of consumervalue (CCV) four particulartypes emerged as appropriate for thecontext of this study. Two of themare self-oriented: excellence (quality), which is a utilitarian value, andaesthetics (beauty), a sensory value, which Smith and Colgate (2007)classify as functional/instrumentalvalue and experiential/hedonicvaluerespectively. The remaining two types are other-oriented: status(impression management) which is a desired value; and esteem(possessions) which concerns possession value. Therefore the authorsclassify the self-oriented types as self-directed types of symbolic/expressive value and the remaining other-oriented ones as outer-directed types of symbolic/expressive value.

Expanding the typology to encompass luxury grounded theoreticalsources of value requires the addition of a number of new sources of value including craftsmanship ( Kapferer, 1997 ) as a utilitarian value.The symbolic/expressive category is expanded by incorporatingband-wagon, snob and Veblen effects ( Leibenstein, 1950 ), the notion of signs ( Kapferer, 1997; Levy, 1957 ), status or esteem ( O'Cass andMcEwen, 2004 ), prestige ( Dubois and Czellar 2002 ), social identity(Vickers and Renand,2003 ), uniqueness mentioned by Kapferer (1997)and rst explored by Ruvio (2008) , and authenticity ( Beverland, 2006 )in the outer-directed category. Symbolic/expressive additions in theself-directed category include self-giftgiving behaviors ( Tsai2005; Mick

and DeMoss, 1990 ), nostalgia ( Holbrook and Schindler, 2003 ) plusinternally focused aspects of uniqueness ( Ruvio 2008; Kapferer, 1997 )and authenticity ( Beverland, 2006 ). According to Schmitt (2003) andothers ( Poulsson and Kale, 2004; Prahalad, 2004; Car and Cova, 2003;Pine and Gilmore, 1998; Carbone and Haeckel, 1994; Holbrook andHirschman 1982 ) consuming the experience adds value in theexperiential/hedonic category. In addition to incorporating new sourcesof value for luxurygoods to theframework,the authors incorporate onenew type of value which Smith and Colgate (2007) did not consider,which is value offered by the relationship with the brand ( Fournier,1998 ), thebrand community( Veloutsou and Moutinho, 2009;Kozinets,2002; Cova and Cova, 2001; Muiz and O' Guinn, 2000 ) and/or theservice provider ( Grnroos, 2006 ), which is particularly important forhigh value luxury goods where personal service and high expectations

are the norm. Finally, the cost/sacri ce category is expanded to

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encompass exclusivity and rarity ( Catry, 2003 ). Table 1 showsreclassi cations and extensions of Smith and Colgate's (2007) originaltypes of value and additions to the theoretical sources in order toprovide a frameworkfor understanding types ofvalue forluxury brands.

6. Methodology

The research utilized a multiple case study approach to investigate

the nature and co-creation of value in the luxury market. The authorsfocused on three luxury brands for this study because of the advan-tages of allowing the investigation of a contemporary phenomenon ina real life context where the boundaries between phenomenon andcontext are not clearly de ned ( Yin, 1984 ). They collected data foreach of the chosen brands over a fteen-month period using severalmethods of data collection including interviews with senior practi-tioners, analysis of of cial brand websites, a netnography of brand-related blogs, together with a limited number of customer interviewsand some retail observations in order to understand the dynamicsof value creation in this market. Not only can the resulting datayield useful managerial and consumer insights, but also the uses of netnography (or online ethnography) and other participativeapproaches to data collection are more appropriate at a time when

latest thinking indicates that the nature of customer involvement andengagement with rms and their goods is changing ( Bonnemaizonet al., 2007; Pealoza and Venkatesh, 2006; Vargo and Lusch, 2004;Prahalad, 2004 ).

The choice of the three case companies was guided by a number of criteria including their global iconic status as well known, aspiration-al, luxury, British, heritage brands (in spite of foreign ownership inone case): Brand X is an automotive company, Brand Y is a designer of fashion clothing, and Brand Z is a department store. Gaining access tosenior managers proved highly challenging and so the Walpole Group(2007) , a UK-based trade association of British luxury brand owners,initially mediated contact.

The authors undertook four in-depth interviews with senior prac-titioners, which lasted thirty minutes on average using an open-endedstyle of questioning. Eight face-to-face interviews with customers of two of the selected brands took place outside agship stores lasting

fteen minutes on average. The researchers followed these with aretail observation at each store, which consisted of eld notes beingaudio-recorded of their description of the store and multisensoryimpressions of the retail environment upon entering each store andwalking all around it. Given the low footfall at UK-based luxury carshowrooms for the remaining brand and the fact that most of itscustomers live overseas, the authors sent a short postal survey tomembers of a club of brand enthusiasts instead.

Since many luxury brands are now focusing on developing anonline presence, the authors considered the examination of of cialwebsites for each of the three brands important. They also undertooka netnography in order to explore the attitudes and behavior of onlinemarket-oriented communities ( Kozinets, 2002; Fller et al., 2007 ).The advantage of this nal form of data collection is that it providesmarketing researchers with a window into naturally occurring be-haviors, such as searches for information by and communal word of

mouth between consumers

(Kozinets, 2002 , p.62). Thus, theresearchers examined both unof cial websites and blogs dedicatedto each of the brands and more general websites dedicated to luxuryautomotive and fashion clothing brands. The netnography was con-ducted in the third and twelfth months of the study period, and itsscope is indicated by thenumber of sources referredto foreach brand:Brand X brand-related websites (47), brand-related blogs (4), luxurycar-related websites (6), and luxury car-related blogs (6); Brand Y

brand-related website (1), fashion designer-related websites (7),brand-related blogs (8), fashion-related blogs (8), designer-relatedblogs (7); Brand Z brand-related websites (2), brand-related blogs(11), luxury fashion websites (14), and luxury fashion blogs (5).

Each interview discussion was audio-recorded and transcribedverbatim. The text was analysed independently by the authors fol-lowing the generalized sequence of steps of data reduction andtransformation, data display and conclusion drawing/veri cation(Miles and Huberman, 1994 , p. 10), which was then discussed, ini-tially on a within-case basis and then on a between-case basis. Usinga similar process for analysis of the online material, the authorsapproached the data from a holistic perspective and undertook datatriangulation to improve the internal validity of the work. By em-ploying what can best be described as dialectical tacking (Geertz,2003 ) the authors continually referred back and forth between theliterature review and the data gathered through the various multiplemethods, to enable us to incrementally generate deeper under-standings of the nature of value and its co-creation for luxury goods.

7. Findings and discussion

This article now presents and discusses the ndings belowaccording to the emergent themes with some exemplar quotationsprovided.

7.1. Types of value delivered and sought

Customers identi ed a wide range of values that they sought inluxury goods and highlighted how the brand delivered value. Theyconsidered money no object due to their status as ultra high or high

Table 1Customer value framework for luxury goods.Source: Developed from Smith and Colgate (2007) .

Types of value Theoretical sources

Utilitarian Excellence ( Holbrook, 1999 ), craftsmanship ( Kapferer, 1997 )Symbolic/expressive Outer-directed Conspicuous consumption ( Veblen 1899 ); bandwagon, snob and Veblen effects ( Leibenstein, 1950;

Vigneron and Johnson, 1999 ); perfectionism effect ( Vigneron and Johnson, 2004 ); signs ( Levy 1957;Kapferer, 1997 ); status/esteem ( Holbrook, 1999; O'Cass and McEwen, 2004 ); prestige ( Dubois andCzellar 2002 ); social identity ( Vickers and Renand, 2003 ); uniqueness ( Ruvio 2008; Kapferer, 1997 );authenticity ( Beverland 2006 ).

Self-directed Bandwagon effect ( Vigneron and Johnson, 2004 ); personal identity ( Vickers and Renand, 2003 );aesthetics ( Holbrook, 1999 ); self-gift giving ( Mick and DeMoss 1990; Tsai, 2005 ); uniqueness Ruvio,2008 ; nostalgia ( Holbrook and Schindler 2003 ); authenticity ( Beverland 2006 ).

Experiential/hedonic Hedonic effect ( Hirschman and Holbrook, 1982; Vigneron and Johnson 1999 ); aesthetics ( Holbrook,1999 ); the experience ( Holbrook and Hirschman, 1982; Carbone and Haeckel, 1994;Pine and Gilmore, 1998; Schmitt 2003; Poulssonand Kale, 2004; Prahalad and Ramaswamy, 2004; Prahalad, 2004 : Car and Cova, 2003 ).

Relational Consumer brand relationships ( Fournier, 1998; Grnroos, 2006; Veloutsou and Moutinho, 2009 );brand community ( Kozinets, 2002; Cova and Cova, 2001; Muiz and O' Guinn, 2000 ).

Cost/sacri ce Perfectionism effect ( Vigneron and Johnson, 1999 ); exclusivity ( Catry, 2003 ); Rarity ( Catry, 2003 ).

http://www.thewalpole.co.uk/2007http://www.thewalpole.co.uk/2007http://www.thewalpole.co.uk/2007http://www.thewalpole.co.uk/2007


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net worth individuals. The cost/sacri ce value category associatedwith the perfectionism effect ( Vigneron and Johnson, 1999 ) andnotions of exclusivity and rarity ( Catry, 2003 ) appear to be irrelevantto them. Money is a necessary but not a suf cient condition for thepurchase of luxury goods. According to one Marketing Director,his customers are not interested in an invitation to come and drinkchampagne as they can afford to have all that they wished and theirtime is precious, but they do value something exclusive and tailored

for them. Theutilitarian value sources of excellence ( Holbrook, 1999 ),quality and craftsmanship ( Kapferer, 1997 ) are assumed and taken forgranted although still acknowledged as being valuable.

Our customer is someone who has signi cant amount of money andsomeone who enjoys ne things. We have... some of our owners arecar collectors and they just love cars and they respect the Brand X for what it is in terms of craftsmanship and engineering. And we havecustomers who buy for what the brand stands for, the history andheritage and the customers who buy it because it's just the best car inthe world. (Marketing Director, Brand X)Using both contemporary and traditional patterns, Brand Z product isknown for beauty, luxury and uniqueness. (Brand Users' website,Brand Z)For me, the last thing I am concerned with is how much it is because

at the end of the day I'm paying for quality and that's what luxury isabout. (Brand Y customer, male aged 33)

Symbolic/expressive (e.g. Vigneron and Johnson, 1999, 2004 ),experiential/hedonic (e.g. Hirschman and Holbrook, 1982; Holbrookand Hirschman 1982; Schmitt, 2003 ) and relational sources of value(Fournier, 1998; Grnroos, 2006 ) were all raised by informants, whoalso provided evidence of the signs and symbols associated with theluxury brands triggering pleasant and creative thoughts. Aesthetics(Holbrook, 1999 ) are important to luxury goods customers andrecognised by practitioners, as is authenticity ( Beverland, 2006 ) withassociatedartefacts guaranteed through a combination of provenance,certi cation, limited production and signed items.

So much effort is put into the design and manufacturing of the carsthat driving a Brand X, smelling the leather, sitting in the seat, isequivalent to the pleasure of drinking champagne, eating caviar, andhaving a back massage, all at the same time! (Member of Enthusiasts' Club, Brand X)Luxury brand means quality, originality, sense of scarcity. (Marketing Manager, Brand Z)Whenever I see his signature on product or paper bag, I feel naturallyconnected to the brand itself. I am always mesmerized by his artistic sophistication and creativity. I also feel lovable when I wear his suit.(Blog: Carrie, Brand Y)

Customersdiscuss luxury goods in rich hedonic language describingthem as opulent , pleasing to the touch and eye and designed to indulge and delight . Fashion bloggers conveyed their delight inwearing designer branded clothing, which evokes status ( O'Cass andMcEwen, 2004 ) or prestige ( Dubois and Czellar, 2002 ), or helps themexpress their uniqueness ( Ruvio, 2008 ). All of these examples are of value brought about during the customer's use of the luxury brandrather than at the point of purchase.

7.2. Processes of co-creating value

The networked nature of value co-creation was in evidence ( Achroland Kotler, 2006 ) through a wide variety of interactions. For thecompanies the constellation of individuals in these value-creatingnetworks is of high status and includes unof cial and of cial brandcommunities, experts including the curator of a national museum,

designers across a range of elds (e.g. fabric, transportation and elec-

tronics); symbols of popular culture (namely an iconic 1960's fashionmodel, a renowned musician, a photographer, a graphic artist), as wellas editors and journalists. According to Bastien and Kapferer (2009)contemporary art is a source of inspiration for luxury brand designersand helps to enable brand owners to maintain topicality and relevancefor their brands. Clearly seeking out fresh and varied collaborationswithin theworldsof art,musicand fashion such as promoting a numberof up and coming designers, serves as a means of enhancing the overall

value of the brands we examined. By comparison, the customer net-works include of cial and unof cial brand communities and socialnetworking sites.

..Brand Y has the ability to anticipate, and even spark off trends not only fashion but in the wider context of popular culture. (FashionistaWebsite)

In the luxury market interactions are multilayered and complex,and not simply comprising interaction between the rm and thecustomer. In addition, they regularly include interactions with otherluxury brand owners, the informed and partisan brand community,opinion leaders, and the owners, employees and customers of othernon-competing luxury brands (e.g. luxury watch, yacht and carmanufacturers engaged in joint events). The customers favor inter-

action with high status individuals as this offers them privilegedaccess to information. In the case of Brand X, this relates to contactwith the Company Designer and an opportunity to tap intoknowledge or discuss new ideas and developments in a sectorthat is of great personal interest to them. As for Brand Z, customershighly appreciate introductions made to new cutting edge

designers in the art world rather than designers from the company,since they can possibly use them to enhance their social capitalamongst members of their peer group. Of the three companies,Brand Y creates value the most widely through public and privateevents including exhibitions, book and album launches, dinnerparties, previewsand limited edition releases. Clearly, co-creation of value requires customer awareness of these events and interest inparticipating in them. Much evidence indicated that customers of

Brand X were the most involved in creating events for themselvesthrough enthusiasts' international, national and regional events andmeetings.

It is all about providing the customer with an experience. Customersno longer de ne themselves by what they own or what they buybecause their wealth means they can acquire almost any assets but they de ne (themselves) more by experiences, whether it's a trip toSouth Pole or it's a balloon ying over the Andes or it's to talk to thedesigner of the Brand X. (Marketing Director, Brand X)

It is noteworthy that not only is the experience about facilitatinginteraction between customersand thecompany andits employees, butalso the experience concerns interactions and experiences shared withcomplementary and similarly positioned brands, and experiences withother members of the elite. So in terms of the developing serviceorientation predicated on processes of joint value creation ( Vargo andLusch 2004, 2008 ) a network becomes important for luxury brandowners in offering opportunitiesfor co-creatingvalue withotherbrandsin the network and other members of the brand community throughsatisfying and tailoring brand experiences based on interactions withbrand staff, customers and their counterparts. In terms of co-creatingservice, the multiple interactions between network members serve asa basis upon which luxury brand owners can develop differentiated,desired and dif cult to copy aspects of their brand experience.

Our customers are very interested in who the other customers are.They are quite competitive people and I think they're quiteinterested in meeting their peers. We make these interactions

possible through our private events, and I think that's the primary



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reason why they enjoy getting together because they get to knowother customers. (Brand Manager, Brand X)... I think that when they buy into luxury they try to buy something that makes them feel special or is special it's almost like buying intoa club, you feel part of something that is exclusive, that is beautifulquality, taking time to design, that is thought about. (Marketing Director, Brand Y)

All the marketers spoke of listening to their luxury goods cus-tomers. They also keep up a constant stream of communication, bothon- and of ine, including blogs to provide information and new ideasfor their customers in real time. Celebrity endorsement through be-spoke clothing for an Oscar winning actor and members of a premierfootball team kept Brand Y in the news.

Many customers will come to (plant) to determine the nal speci ca-tions of their car, and many will also come and see it during themanufacturingprocess. So it is very much part of our strategy to deliver an experience on a long term basis and also itwould be fair tosay that it is something thatour customers willdemand from us theywantthat degree of involvement. (Marketing Director, Brand X)

Only Brand X demonstrates a sophisticated understanding of theprocesses and bene ts of engaging in a dialogue with customers. Theyfocus on offering speci cally what the customer wants, and listensand responds to customers effectively in order to co-create thedesired experience. By comparison, the other brands communicatewith their customers more indirectly through opinion leaders, themedia and staged events, which indicates that the two-way processesthat lead to co-created brand experiences and the co-creation of valueare not yet in place.

We try to create a one-to-one basis in stores so it will be up to eachstore manager to develop their own customer base and work closelywith regular customers to build up regular relationships. So each shophas its own data base and has to look after it. Mainly, customers willreceive invitations for previews or maybe Christmas shopping evenings

just for thosecustomers, so we try to make themfeel special. We don'tdoa loyalty card, but who knows, possibly in the future, as technologybecomes more and more relevant. (Marketing Director, Brand Y)We have a quite strong press team who are looking for editorial,coverage and product placements in the right target publications. Wealso conduct web or online communications, so e-communication,and we have a big email database, and we also contact loyalty cardsregularly to inform them about new things happening in-store.(Marketing Manager, Brand Z)

The overall luxury brand experience offers an important way of enhancing perceptions of each of the ve types of value proposedearlier in Table 1 . The participants reported a broad range of person-alized experiences including private and select dinner parties to meet

senior managers and in uential individuals in the eld, a bespokegrooming service, a private book launch, and the opportunity to joinan exclusive members' club. Facilitating and participating in suchexperiences with the customer is the process by which so much valuecreation takes place ( Schmitt, 2003 ).

For the case study companies these experiences offer an oppor-tunity for some unscripted interactions between the brand staff andcustomers in order to gather information, tailor the experience to theindividual or refresh its format. For the marketers they offer bene tsfor the luxury good consumer that literally money cannot buy, whichenhances brand exclusivity ( Catry, 2003 ) and prestige ( Dubois andCzellar, 2002 ). For these reasons, the automotive plant and agshipstore and outlets for the case study brands represent unique venuesand destinations in themselves: designed to facilitate a special expe-

rience for the luxury customer and staffed with well-trained and

informed employees keen to assist customers rather than push theminto a purchase.

I also like the assistants in Brand Y, they're very courteous and theydon't push anything onto me. They don't seem to be there to sell but to advise. (Brand Y customer, male aged 32)The store is beautifully laid out and just a wonderful experience. Thisis a store I couldn't live without. (Blog: Streetwise, Brand Z)

8. Conclusions and implications

This exploratory study examined how marketers and consumerscan co-create value in the luxury goods marketplace. So far, much of the traditional marketing literature, plus that in this setting, takes amanagerial perspective and neglects to take into account theconsumer perspective. Examining this marketplace as a socialconstruction offers deeper insights into the nature and sources of value both in exchange and use ( Pealoza and Venkatesh, 2006 ).

The researchers have developed a theoretical framework of typesof value for luxury brands, and have used case study research toexplore the many types of value which customers seek and receivefrom luxury brands. While a high standard of utilitarian value isassumed as essential for all luxury goods and cost/sacri ce basedvalue appears to be irrelevant to customers; the symbolic/expressive,experiential/hedonic and relational types of value are the ones whichenable differentiation between various luxury brands. As Table 1illustrates, the nature of these particular types of value is varied.

This study identi es processes of value co-creation by rms andcustomers. Co-creating the luxury brandexperience involves dialogueand complex interactions between the brand owner, employee,customer and other social groups including the customer brandcommunities, those experts or agencies who are part of the brandowners' network and the industry itself. The experience only createsvalue when the parties engage and market with each other, that is,when no separation between production and consumption occurs,which traditionally serves to divide the parties. Without a doubt theinteractive and networked nature of value creation is hugelyimportant,cutting across art systems, fashion systems,design systemsand integrated marketing communications systems which mediatebetween the culturally constituted world and the consumer good(Arnould et al., 2004 ) and also accommodates the latest develop-ments in technology and innovation. So brand owners must establish,develop and refresh their networks in order to access new ideas andexpertise, which will enable them to innovate continually in a highlycompetitive marketplace and stay at the cutting edge.

Brand owners do not just offer value rather they co-create valuewith inputs andin uence from customersand other parties to achievevalue sought in terms of exclusivity, recognition, access to privilegedinformation and prestige. The ndings indicate that the substantialinterplay amongst non-competing but complementary luxury brand

networks co-creates value. Interactions with high status individualshave becomea crucial differentiator andsource of value foreach of thecase brands. A huge range of public and private events was identi ed,which were not necessarily brand owner-led or even controlled bythem. Certainly, the netnography revealed that the brandscapes arerich and varied involving partners whom the brand sponsors but alsothose who are completely independent of the brand. This conclusionsuggests that practitioners should monitor all channels of brand-related communications (i.e. of cial and unof cial), so that they canrespond to them exibly and interactively. Many opportunities existto engage customers usefully in dialogue instead of opting for anextensive array of one-way communication. However, luxury brandowners should also recognise that customers want different levels of engagement with their brands ranging from minimal to highly

involved. Co-creating value for each of the case brands requires



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skilful and well-trained staff, who can successfully engage throughmultiple channels in an appropriate dialogue with the ultra high andhigh net worth individuals who constitute much of the market forluxury products. Venues are also important, with each of the brandshaving iconic destination outlets of high prestige and design content,which add value for their customers. Whether changes in thecustomer base for luxury goods generally or the emergence of theonline marketplace will change this need materially, remains to be

seen.

9. Limitations and future work

The ndings reported from this exploratory study are limited tothree case studies in one country and so may not be generalizable toall luxury brands. Therefore, further research jointly examining valueco-creation from both a practitioner and consumerperspective shouldconsider a broader selection of luxurybrands. Theglobal natureof thismarketplace and the increasing importance of luxury goods in China,India and Russia suggest that further research in other countries,particularly in collectivist cultures, is needed as is work on the issue of the disposal of luxury goods.

While the service-oriented, customer-focused approach has provid-

ed a fruitful lens to aid the conceptualization process in this study, theemergent status of this work makes this approach challenging to workwith, particularly due to its continual evolution in language andsubstance throughout the fteen months of the study.

Acknowledgement

The authors wish to thank the editors and anonymous reviewersfor their helpful and considered comments on this paper, as well asacknowledging the nancial support provided by a bursary from theWorshipful Company of Marketors and the assistance of the WalpoleGroup in gaining access to senior managers for this study.

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