The Internet use by the Luxury industry An interactive tool for a very demanding sector Supervisor: Margareta Paulsson Authors: Charlotte LARBANET Benjamin LIGIER Master Thesis Umea School of Business Spring Semester 2009 1 Acknowledgements Assistance from many people contributed to the accomplishment of our master thesis. Therefore we wish to express our thanks to Umea School of Business and Economics for contributing toward the success of our year abroad in Sweden. Also, we would like to thank our teachers, friends, and classmates at USBE.
It has been a real privilege to work in an international school at multinational and diverse people? s side. Special thanks go to our supervisor Margareta Paulsson for her determination to make our paper each time better with corrections and suggestions. Finally, we appreciated the love and encouragement from our families stayed in France during this experience of ten months at Umea. 2 Dedication This thesis is firstly dedicated to my parents Anne-Valerie and Patrice Larbanet and to my grand-parents Annick and Jean-Paul Godart for their education and love; and to Marc Moles for all his support during this year.
Charlotte Larbanet I highly dedicate this thesis to my entire family: my parents Michele and Daniel Ligier but also to my brothers and sister Maxime, Jean-Philippe and Anne-Sophie Ligier. Benjamin Ligier 3 Summary Luxury is a particular sector that is difficult to define. However it can be characterized using these following adjectives: high price product, exclusivity, prestige, and niche market. A luxury branding offers a high quality product associated to a superb level of service to customers looking for pleasure, experience but also social identification.
Internet is a mass media using by 1,596 million of people around the world that don? t permit physical interaction between web users. Despite this, the authors asked themselves why a mass media without physical contact possibility was used by an industry of niche whose the pillars are high service levels and relationship. The aim of the study was firstly to understand and show that the Internet is a medium equal to the luxury industry? s demands and needs in terms of communication and distribution. The second objective was to describe how luxury brands should design and build their websites in order to respect their luxury? specificities and reach their goals. This paper starts with a definition the luxury sector in order to equip the readers with the subject in concern. Besides it, an overview of the relevant concepts about marketing tools and Internet applications available to online brands is made. Then, the concept of Web experience is reached giving the four important elements in a website conception: technology, interactivity, trust and services. Next, we audited eight French and American luxury websites using these same four elements in order to observe current practices and support our literature review.
By making comparison between theoretical and empirical findings, we observed that there are many marketing tools and Internet applications that are actually used. Viral marketing, Relationship marketing, Customer Relationship Management and Web 2. 0 applications are some examples of what permit to improve the four online elements and thus provide a real luxury web experience. After this study, we concluded that the Internet medium was equal to the luxury industry? s requirements and needs because it actually permits them to provide a service f high level and to build relationship with online customers. Secondly, we precised which elements of a website, in concrete terms, have to be improved at their maximum during the website conception. The contribution of this thesis is mainly a feedback for luxury managers and web-designers in order to inform them about what is really possible to realize online nowadays and what it is actually done in France and in the USA. 4 CONTENTS CHAPTER ONE:
This overview takes us to a knowledge gap within the current area of all the possibilities given by the Internet usage by the French luxury brands in order to provide a luxurious web experience and a virtual visit of high quality for their online customers. This knowledge gap enables us to build our research problem and to precise the purpose of our present study. Furthermore, we identify our main readers target and inform them about some limitations in the study. Lastly, we announce our guideline presenting the main steps used in our paper.
In order to present the background and problem discussion, we used a country of reference, France, our native country, which is the country that „owns? the most famous luxury brands and that is known as the country of “savoir-vivre” and luxury. We decided to deal with our research question at an international level, that is to say that we have not limited our researches only to France and French brands even if our point of departure is based on a paradox related to French luxury brands. 1. 1 Background The Internet, the international-network? s abbreviation, was invented and developed in the 1960s by the American government.
Since 1990, the Internet knew an overture of its use by other organizations that governments and universities. It took only few years for private firms from all over the world to understand what its main benefits were and how use it correctly to take advantage of this media. Thus, firms, small or multinational, from America to Africa and from many types of sectors started their Internet adventure opening websites (Lagasse, 2008). It was also the case in France, for instance, where the Internet was the media knowing the most important growth of its investment in advertisements with 34% of growth between 2006 and 2007.
At the same time all the other media like TV, radio, press or poster knew a decline or a weak growth of their investments. Thus, 97 of the 100 biggest ads investors in France are nowadays present in the Internet (Levin, 2007). So, in spite of an international financial crisis context, the Internet is the only media that keeps attracting increasing levels of investments. French firms have started to diminish their advertisement investments in many media but it is not the case for the Internet. In front of all these firms present online, an audience more and more numerous all over the World is connected.
This always high number of Internet users and the Internet attraction for ads investments show clearly the power of this new media that is called a mass media. It has the ability to extend incredibly the communication? s volume and speed with anyone who has also an Internet connexion (Neuman, 1992). But, despite all the Internet? s advantages, the last French sector to not use this powerful media was the luxury industry. This particular sector used to communicate through its consumers via distinctive media like fashion magazines and posters.
And the only way for buying French luxury products was to go to one of the few stores often only in the Capital of fashion, Paris. This sector of niche would not use a media such the Internet because it was not part of their marketing strategy. In spite of the fact that American luxury brands were already present for a long time online, it is only after 2005 that the French luxury brands like Clarins started to use the Internet opening its own website. They have first opened only an online showcase in order to take less risk as possible but they were precursor.
Few years later the great majority of the 7 French luxury brands are now present online offering e-business and sometimes e-commerce websites for the highest pleasure of their online consumers. 1. 2 Problem discussion Luxury can be defined thanks to specific characteristics like high sophistication products or services, high prices, impressiveness, and rarity. But in spite of these few distinctiveness there is not a common definition of what luxury is. Indeed thanks to different authors, luxury can be defined in several ways.
The “Rarity principle” is explained by Phau and Prendergast (1998, p. 122). The uniqueness and exclusivity characteristics of luxury are really important points according to those two authors. When consumers buy luxury products, they are expecting a definite level of uncommonness and rareness and this is their purchase motivation. This idea of uniqueness is linked with the idea of quality because products of high quality are most of the time very expensive due to the time spent on creating and realizing a product and due to the material and “savoir faire” used.
The luxury world is also addressing its messages and codes to a small target due to the fact that what is unique or luxury, is very often expensive. Indeed the luxury brands don? t have a large target in order to keep their exclusive image. In order to make easier reading of the rest of the thesis, we will define the luxury product concept as a product of high quality sold in short quantities and at a relative high price. Lastly, according to Reppa et al. (2007), a luxury branding offers a high quality product associated to a superb level of service.
In order to attain a good customer satisfaction, these luxury brands are concentrated on four main points: create a “customer centered-culture” at all levels to create value, take good care to choose the best staff in order to give a finer image of the brand and to satisfy customers for the best, pay attention to retrain employees in order to help them to be at their top, constantly measure the customer satisfaction and needs to improve continually their sales. Around 1,596 million of people around the world use the Internet (Internet World Stats, March 2009). It represents in average 23. % of the worldwide population and this number of Internet users should increase again during the next years. 74. 4% of the North American, 60. 4% of the Australian, 48. 9% of the European are connected to the Internet. Moreover, children, teenagers as well as seniors learn how to use the Internet. Everybody is concerned. Through these figures, it is easy to understand the huge power that represents the Internet media in the entire world. More and more people use the Internet, and more and more powerful and attractive is this communication and distribution channel for companies.
Thus, the Internet was seen and continues to be often seen like a mass media. And unfortunately, this impressive number of Internet users doesn? t help to destroy its bad image that shows the Internet like a communication tool connecting no matter whom with no matter who. Indeed, in this way, Chan K. et al. (2007) had started one of their articles by “The internet is undoubtedly the most prominent mass medium today” (p. 244). This same opinion about the Internet is also shared by Melewar et al. 2003) that had stated that the Internet “has the potential for mass communication and advertising with negligible variable cost per customers” (p. 364). Because everybody uses the Internet, this mass media is a great tool for any company that has to communicate toward the majority of the population. Moreover, Colgate et al. (2005) in a study about the relationships benefit in an Internet environment has showed that the lack of personal contact online could have a negative effect on how customers feel linked to a brand and thus it affects their loyalty.
This is true that a firm opening a website often meets the difficulty of this lack of physical interactions with its online customers. It seems hard to look after customers without to get them in front of you. 8 And this point is one of the most important breaks of the use of the Internet by the luxury brands for which the relationship with their customers is the key of their business. Thus, as any media, the Internet has both assets and drawbacks. We can undeniably characterize the Internet as a mass media unable to permit human contact, associated with mass consumption and mass communication.
At the same time, the luxury industry is a business area where relationships and services levels are precisely considerable and which is centred on a relatively small and demanding target. So the use of this kind of tool by the luxury brands seems to be contradictory. Over the years, the Internet has evolved. However nowadays almost every luxury brands, even the French one, have already open e-business and/or e-commerce websites. Some of them only use an e-business website in order to be present online for their customers providing them all information they need about the brand or products.
In a more general context, the term e-business is defined as the use of the Internet in order to connect customers, suppliers, employees and other stakeholders with the organization in order to exchange information about its products and policies online (Rodgers et al. , 2002, p. 186). Other luxury brands, more adventurous, took the risk to open an e-commerce website. An ecommerce website is used to connect customers with a firm in order to provide products and services online (Rodgers et al. , 2002, p. 86). So, finally, after a while, managers became aware of the new Internet possibilities that could completely change their point of view about this media. Thus, fears and apprehensions were replaced with hope and expectations. Their scares about the impact of the Internet use on brand images are nowadays an idea only shared by the last pessimists. The risk of competition against traditional stores, called cannibalization, was totally forgotten and the one about online counterfeit products is fighting out.
The main assets of the Internet like its power to attract new types of customers, its relatively weak costs of communication and distribution, its high results and its high service levels are nowadays put up by the luxury brands. In a context closer to today, the Internet is continuing to evolve. The only problem left by this Internet and luxury brands association was the lack of human relationship between the luxury brands and their online customers.
Indeed, the luxury industry guarantee to each of its customers a pleasant welcome in each store, a personalized and constant help and advice during their shopping times in order to make it nicer again, and an impeccable sense of service like payment and delivery at home. But online, it is much more difficult for a luxury brand to do all these so crucial things in order to keep its luxurious identity. However, the luxury brands need to take care of their customers even if they are online and divided from the salesperson by many kilometres because it is the identity of their brands that is at stake.
And here is where our knowledge gap is situated: How can the luxury brands promote their luxurious activity and create relationship with online customers through a website? Rich media, the Web 2. 0 technologies and online security are some of the factors that have totally improved the web experience possibilities and particularly for the luxury sector. Through these new possibilities, the Internet permits nowadays many improvements of websites quality and potential. 1. 3 Research question and objectives
In front of this paradox, a mass media without physical contact possibility used by an industry of niche whose the pillars are high service levels and relationship, we can easily ask ourselves 9 these following question: How can the Internet promote an online luxury experience of high quality and relationship by luxury brands? Based on the problem discussion and the purpose of the thesis and the research question, following sub research questions will be answered: 1. Is the Internet a medium equal to the luxury industry? s demands and needs in terms of communication and distribution? . How luxury brands should design and build their websites in order to respect their luxury? s specificities and reach their goals? By answering these two sub questions, we would like to make a report on how luxury brands should use the Internet medium according in theory and what do they effectively do online. The main aim of this thesis was indeed to advice online marketers and Web designers working in the luxury sector about online current practices both by French and American luxury brands in order to improve themselves in their professional activities. 1. 4 Delimitations
We have chosen to study the international luxury brands and their Internet use. The main reason is because, as we will see, all luxury brands or at least most of them have adopted the Internet as a part of their strategy. However we will focus our attention on two countries in particular. Indeed, we chose to center our attention on the United States of America and France because the American luxury sector is the second luxury industry in the world and France is the ambassador of luxury and mainly because it is at the first place of the worldwide luxury industry according to the official website of the French economical government.
Moreover, we have chosen to focus on the luxury brands that sell online and so that use an ecommerce website. Actually, we wanted to look at the Internet more precisely as a distribution medium. Lastly, we restricted our study on three families of luxury products: leather goods, haute couture and accessories, and jewelry. Thus, we didn? t talk about premium hostel, liquor and spirit, food and furniture of high quality. This choice was made because of a really few numbers of websites of these types of brands were found online. 1. 5 Readers
We have studied many articles about the Internet? s use by the luxury brands and then we have try to write our paper giving back all the important points that were cited by different authors to characterize this ongoing relationships. So, here, we are speaking to online marketers and website designers from the luxury sector or working with this type of sectors. We have described specificities of this particular industry. And those points were pointed out as needing particular attention when a website for a luxury brands is designed and created.
Of course, students of the Business School of Umea are also specific readers targeted by our paper, particularly, those studying in marketing. Indeed, this paper is a good starting point for students who don? t know anything or only few things about the Internet in a business use. It could be a great reading for those who hope for working either in the Internet area or in luxury sectors. 10 1. 6 Plan announcement The thesis is divided into seven distinct chapters. 11 Introduction Chapter One: • This first chapter begins by providing background in order to present the ramework of the topic and explain its necessity. Then the research question and its two objectives are formulated. Besides this, the delimitations are given to readers. Lastly, the chapter ends with a plan announcement. • This chapter discusses and the authors? preconceptions influencing or not the choice of our topic. Then the perspective of our study is presented. Lastly, diverse alternatives for research approaches are discussed and our choice made for this study is explained. Chapter Two: Methodology Theoretical Chapter Three: Theoretical Framework This chapter reviews the theoretical foundation and literature relating to the luxury industry and the Internet medium. It presents several defitions of what is luxury and presents many Internet marketing tools. Lastly, it equips readers with key concepts about the Web experience. Chapter Four: • This chapter describes the practical aspect and the process concerning the collection, observation and analysis of empirical data. Practical Methodology Chapter Five: • This section presents the data collected through an auditing of eight websites, conducted in order to fulfill the purpose of this study.
The results are summarized according to three main criteria. Empirical Findings Data Analysis Chapter Six: • This sixth chapter confronts our theoretical and empirical findings in order to show the linkages between all parts of the study and form the bases for the next chapter. Chapter Seven: Conclusion • The last chapter presents the conclusion of our thesis. It explains if the research question and objectives are fullfilled. Then, it underlines what could be the further researches about this same subject. 12 Chapter Two: Theoretical Methodology
In this chapter, we make a description of the methodology adopted in order to answer the research question. First of all, an explanation of the choice of the subject will be presented, followed by the perceptions and the background of the two authors Charlotte Larbanet and Benjamin Ligier. We will also discuss the perspective of this thesis. Then we will focus our attention on the different approaches used to write our paper, that is to say the scientific approach, the research strategy and the deductive approach. Finally this chapter will end with a discussion about the secondary data collection. . 1 Choice of the subject Before this international business program in Umea, we were respectively interested in the world of luxury and design concerning Benjamin and about Luxury and the Internet concerning Charlotte. While we were following the same Marketing Master? s program, and since we had the same sensibility to the world of luxury and luxury industry, we decided to work together on a common subject in which we were very interested each other. Charlotte had previously written a thesis about the connection between the French luxury sector and the Internet.
We tried together to find an interesting area of discussion that is linked with actuality of luxury and we decided to focus our intention on the relation between the Internet and the world of luxury, and mainly luxury brands. Each one of us wanted to understand why and how a luxury brand can use the Internet that is completely virtual in order to promote its exclusive and sophisticated image (identity, atmosphere, values…) and what kind of tools (eCRM, internet technologies, e-commerce and e-business websites…) the French luxury brands adopt currently.
Since Charlotte had prepared a bachelor thesis related to the idea that French luxury brands had some delay to adopt the internet as a business tool, we also wanted to know if nowadays, they use the internet fluently as a marketing and business tool, and in which way they use it. However we decided to focus not only on French luxury brands but in luxury brands in general since luxury brands are known worldwide as they make business all over the world. We had the opportunity to deal with a subject for which we have some knowledge and for which we wanted to have deeper awareness.
So our thesis is the opportunity for us to understand the strategy of luxury brands nowadays. Moreover, since the Internet is an integral part of the people from industrial countries? lives, it was interesting to relate the subject in which we were most interesting to a tool as the Internet which takes more and more importance in our habits. Indeed the Internet is a mean of communication and information that is very widespread, that has taken a real place in people everyday lives, that knows many changes every time.
The fact that most of the companies of any kind use the Internet today was also an opportunity to understand which of them, luxury companies can use to promote a luxury experience of high quality and establish customer relationship online. It is right that many companies of all kind use the internet as a marketing, and business medium. From furniture companies to luxury items companies passing through sport wear companies, every type of brands and firms use the internet and have a website.
However since customers of luxury brands are very demanding it was interesting for us to understand how luxury companies, specifically, can establish a customer relationship and an online experience of high quality. 13 2. 2 Author? s background The authors of this thesis, Charlotte Larbanet and Benjamin Ligier, are two persons coming from the same country: France. We have more or less followed the same curriculum even if we don? t come from the same Business School in France. This year we were studying in Umea in the same program, which is the Marketing master? s program.
Last year Benjamin was in internship during the all year related to his Business school program at Dijon. At the same time he was working for a jewel company in France (student job). The main activity of this jewel company, Maty, is to sell jewels in stores but also through the Internet. Even if his interest for luxury was born before this experience, this job gave him the opportunity to reinforce his sensibility to this world and to French luxury companies and luxury companies in general. His interest for luxury brands encourages him to prepare a thesis about this area.
During the last year, Charlotte was studying at the International Business School of Rennes, in Brittany. Over this year, she learnt how to design an e-commerce website for a hypothetical cosmetic company as part of an e-business class. Before that, she has made two different internships. The first one was as advertising manager in a small ads agency near Paris. During this internship her mission was to sell advertising spaces in French fashion magazines and she quickly became aware of the important competition that the Internet already represented in 2007 as communication channel in this sector.
Then, she chose to make an internship in the Internet area in order to well understand how this powerful works and above all how it can be cleverly used by a company. Her interest for the Internet possibilities was developed during this internship. Based on the knowledge and important interest of each one of us about the subject we have worked on, we had some preconceptions to develop our idea about this area. So the common interest for the world of luxury encourages each one of us to deal with a research question related to this domain.
The previous work made by Charlotte also encourages us to deal with the use of the internet related to the world of luxury. This work was for us a basis of departure, that led us to find a research question related marketing to and promotion since this is our domain of study. Moreover the current events and present of the Internet and also the information we have about luxury encouraged us to write a thesis about the relation that exists between the two sectors.
Furthermore, we believe that luxury brands in particular want (more and more) to build deeper relationships between them and the customers, that is to say that they want to develop E-CRM (customer relationship management thanks to the Internet). This industry is certainly one of the industries for which the Internet can be considered as not really adapted yet but that could bring a lot. 2. 3 Perspective of the thesis This thesis was written from an e-marketer and web design perspectives. Indeed this paper was written to present how do luxury brands use a tool as the Internet to communicate and distribute.
Because it is a medium that takes more and more importance and is certainly already a key tool for many companies, we think that e-marketers have to be aware of this technique. The large number of data from newspaper, and the constant evolutions known by this information technology, encouraged us to write a thesis in order to brighten all the 14 important elements to take care over during the creation of a luxury brand website; that is to say: the technology used, the importance of interactivity and the place of relationship with the internet surfers, and the level of service provided. 2. Scientific approach According to Saunders et al. (2007), when a research project is made, the beliefs and the past experiences of the researcher can bias his ways to interpret what is surrounding him. These beliefs and experiences are called research philosophy or research paradigm and it refers to the way the truth is discovered and how the knowledge is developed. There are two different approaches: the epistemological position and the ontological approach. Each of them influence the way researchers think about the research process (Saunders et al. , 2007). Epistemology concerns “the question of what is egarded as acceptable knowledge in a discipline” (Bryman et al. , 2008, p. 13). The point is to know what an acceptable knowledge is and what is not. Ontology concerns “the nature of social entities” (Bryman et al. , 2008, p. 18). Is the reality described objectively or subjectively by researchers (Saunders et al. , 2007)? There are three different positions in epistemological considerations: positivism, interpretivism and realism. Positivism “advocates the application of the methods of the natural sciences to the study of business reality and beyond” (Bryman et al. , 2008, p. 14).
Reality exists objectively out there and it is only by following the scientific method of testing hypotheses that we can get knowledge about it (Bryman et al. , 2008). Thus, researcher should try to be neutral to the object of their study. Interpretivism states that because “the subject matter of social science – people and their institutions – is fundamentally different from that of the natural sciences” (Bryman et al. , 2008, p. 15), researchers need to interpret the reality. So, interpritivism position views social world and natural world different and consequently, researchers have to use different procedures to study social world.
Realism shares features with both positivism and interpretivism. According to Byrman et al. (2008) there are two forms of realism: the empirical realism and the critical realism. The empirical realism states that if researchers use the appropriate methods to study the social world, they can really understand what reality is. In contrast to it, the critical realism argues that there are differences between objects and the terms that we used to describe and understand them. Indeed, what we experience are only sensations, interpretations of what we see in our environment.
And sometimes our senses can mislead us (Saunders et al. , 2007). For the subject we want to develop here, it seems important to use an epistemological assumption in a interpretivist way because of the fact that we need to understand the past, the background and the different aspects of our subject and make some relations between our two purposes (luxury and the Internet); that is to say understand how the Internet can allow luxury brands to make their promotion and online sells and how it allows them to establish customer relationships online.
So, firstly we need to collect data and make some lecture reviews to understand and accumulate some knowledge concerning the world of luxury and the Internet tool. We should also analyze in which way the Internet can contribute to their marketing and sell strategies (to promote their image, to sell online, to establish customer relationships).
Then, the use of epistemological assumption based on a interpretivist way is important because if we want to study the relationships that exist between luxury and the Internet, (so to answer our research question), it needs to be explained with a subjectivist view due to the fact that the understanding of this relationship between these two sectors is based on malleable data that cannot be stated with neutral approach since we, of course, have some feelings about the subjects and due to the fact that some authors have already written some articles about the 15 subject.
So we will often be subjectivist about our subject. The explanations that we will find is based on human beings senses. Moreover our study is mostly based on qualitative data because we will use interviews from newspapers, observations from our auditing of websites and documents like articles. Thus, the use of interpretivism is natural in our work, because we give our opinion and interpretation of data and to answer the research question. It seems normal for us, during the collection of data, in particular primary data, to have some feelings about what we expect, what we want to find.
Indeed it would be difficult for us to study this subject without having a list of criteria to find the information required. These criteria are of course dependent of our expectations and feelings about the study area. Even if we are mostly studying websites and not “social actors” (Saunders et al. , 2007 p. 106), we needed to make a list of elements to observe and to analyze. That is to say: the technology used, the quality of pictures, videos, the characteristics of the website that provide interactivity, and high level of service.
It is not only an observation, but it is also a kind of interpretation of data. Our feelings influence our way of proceeding and the elements we wanted to study. As for epistemological considerations, the ontological has several positions: the objectivism and the constructivism. The objectivist position states that researchers should study social world using objective methods rather than using researcher? s sensations and/or intuitions. It argues that social world exists outside of the researchers? mind (Bryman et al. 2008) and has an existence independent from its actors (Bryman et al. , 2008). The constructivist position, on the contrary, states that social phenomena have an existence dependent on social actors (Bryman et al. , 2008). Reality is a social construction (Bryman et al. , 2008) and social interactions. Thus, social phenomena are in a constant evolution. We have decided to focus our research and analysis on the way the Internet can contribute to promote a luxury experience of high quality and relationship as much online as in traditional stores for luxury brands.
It seems important to understand the stated situation, the background, in order to explain why the most famous luxury brands are now using the Internet, to understand their delay to use e-business in particular and finally how do they practice nowadays (e-CRM, promotion, selling). So in this way, in order to identify exactly the background, it is important to use ontological assumptions in an objectivist way. Indeed, the attitude of the customer in front of the luxury market can be understood thanks to the online customer relationship management established by luxury brands.
In our study we had to understand the background of luxury brands, the definition of luxury and to understand what kind of marketing tools are available to make some promotion online. Since there was no interaction between the authors, Charlotte and Benjamin, and the luxury brands managers or marketing experts, the research reality was not constructed but just stated. Indeed, the websites were examined as existing independently from the thesis? authors. Thus the data were not created in interaction but were later interpreted. Consequently, the ontological approach is objectivist. . 5 Research strategy Research strategy can be characterized by two different aspects, that is to say, quantitative and qualitative aspects. Quantitative is mainly considered as a collection of data or a technique of data analysis that lead to numerical data. At the opposite, qualitative is used as a technique of data collection or analysis that leads to non numerical data. For instance, Words, pictures and videos are non numerical data (Saunders et al. , 2007). According to Saunders et 16 al. (2007), qualitative data are used to “develop theory from your data” (p. 72). And qualitative data “include both deductive and inductive approaches” (Saunders et al. , 2007, p. 472). The object of our thesis is to know how luxury brands can promote their luxurious activity and create relationship with online customers through a website. We think that it would be very difficult and not very relevant to use a quantitative strategy, due to the research question we have. Indeed since our research question is “How can the Internet promote an online luxury experience of high quality, and relationship by luxury brands? We will have to find many qualitative data about the marketing tools used, the technologies used to create a website of quality and useful for internet users. We decided to use qualitative data since we have to explain a link between two different areas that are the world of luxury and the Internet. Indeed quantitative data wouldn? t be so necessary due to the fact that the explanation we want to give in our thesis is focused on qualitative data. Numerical data, in particular statistics, thanks to some surveys can be helpful for our statements.
Moreover, since we have audited some luxury brands websites for our empirical study, our main data will be qualitative. In order to be able to answer the most correctly to our research question, we decided not to focus our attention on quantitative data but more on qualitative data. Indeed since we have to explain and understand the “behavior” of luxury companies toward the Internet, qualitative data will be mandatory for us to be able to make some explanations and understand the link between the two points that we are studying (luxury and the Internet).
Concerning the data collection, we focused our attention on secondary and qualitative data in a subjectivist way since we have some feelings and knowledge about the subject. So the data collection has to be subjective. Moreover, we didn? t design any questionnaire because it wouldn? t be relevant for our study. Indeed, we would like to have the point of view of managers from the luxury industry and not the opinion of the luxury consumers. We are mostly subjectivist in front of the research we made since each one of us has some preconceptions about the subject.
For instance Charlotte had previously written a thesis about the Internet and the world of luxury. In order not to be too much subjective, and to be quite neutral in order not to influence the answer according to our preconceptions, we made a list of criteria on which to focus all along our empirical part and more precisely during the auditing of luxury websites. 2. 5. 1 Critiques of the qualitative strategy Due to the fact that our subject requires more qualitative than quantitative data, we had more constraints and difficulties for the analysis of the data.
Indeed, qualitative data didn? t provide all the information we could need to build our answers. A mix of qualitative and quantitative data analysis could give a larger view for the answer to the research question. Furthermore, we could have made luxury managers interviews in order to collect qualitative data. But unfortunately, we didn? t have enough time and enough positive replies from the luxury companies we contacted. Thus, we have made the choice to make our own auditing of French and American luxury websites in order to get also qualitative data. 17 2. Deductive approach There are three different possible research approaches: deductive, inductive and abductive approaches. The deductive theory is the most ordinary point of view that researchers can use to link theory to social researches. It is a hypothesis testing theory (Bryman et al. , 2008). Indeed, it consists in starting with analyzing theories already existing in order to state some hypothesis that we want to test. Researchers then collect data in order to confirm or reject the primary hypothesis and finally develop specific conclusions or new theories (Bryman et al. 2008). The inductive theory, on the contrary, starts with specific observations to go to generalizations. Indeed, it consists in starting with specific observations about a field of study or a purpose that are theoretical elements and infers one or several hypothesis which then will be analyzed and compared with empirical findings in order to confirm of reject the primary hypothesis and finally develop general conclusions or theories (Bryman et al. , 2008). The last approach is the combination of induction and deduction approach (Saunders et al. , 2007, p. 119).
Abduction is when a researcher combines both induction and deduction processes. That is to say that the point of departure is the theories, then the researcher make some observations and findings and lastly he can generate some theories according to what he observe. For our subject we decided to use a deductive approach. Thus, we started our thesis by enlightening some backgrounds about the use of the Internet by the luxury brands. Then, we presented some theories about e-CRM, Web experience and customer behavior online. We made an audit about eight French and American luxury websites to support our theories.
So we checked for deviation from the needed tools present on the websites and we wanted to see if the websites were in compliance with the wanted communication and distribution aspects included in the major criteria. Our approach is deductive since the theoretical concepts were tested. Thanks to the empirical research that we made, we could make some analysis of what the theories said and so make some comparisons in order to draw a conclusion. 2. 7 Secondary data Secondary data are considered as data that can be reanalyzed due to the fact that they have been collected for previous studies or researches.
They are considered as data that can give some good and helpful sources from which you can answer your research question or be helpful to answer it (Saunders et al. , 2007). Secondary data can be of different forms: documentary data including written materials (ex: reports to shareholders) or non-written materials (ex: video/voice recording). It can be also multiple source data like area based data (ex: governments publications), or times series based (books, journals, government publications) and finally it can be survey based data including censuses, continuous and regular surveys, and ad hoc surveys.
For certain types of research project, such as those requiring national or international comparisons, secondary data will probably provide the main source to answer your research questions and to address your objectives. (Saunders et al. , 2007, p. 246) The collection of secondary data in order to have information can be done in different ways. Books, articles from scientific journals, articles from newspaper (used to have a current view of the subject and not only scientific), information from websites thanks to the Internet. 18
We found our information thanks to three kinds of sources. To identify and collect secondary data in relation with our research question, we used various articles. Those concepts are presented in the theoretical part. The scientific articles were found mainly via two types of databases, that is to say, Emerald and EBSCO. Since Charlotte Larbanet already worked on a similar subject for a previous thesis, we used once again the sources she used for her work previously. Some current articles were found on Delphes which is a rich database for current articles.
In order to find many data and gather much information for our thesis we used many and various key words. We used in particular the following one: “luxury”, “luxury definition”, “luxury branding”, “internet”, “internet 2. 0”, “web 2. 0”, “luxury and the Internet”, “luxury and E-business”, “luxury brand and the use of the internet”, “luxury branding on the Internet”, “Louis Vuitton-The Internet”, “Ipsos (Survey Institute)” “customer behavior”, “online relationships CRM”, “e-marketing”, “viral marketing”, “online community”, “mass media”, “rich media”, “online consumption”.
We also used the search engine Google in order to find current data about the subject due to the fact that we needed current information in order to have a deeper understanding on recent relation between the world of luxury and the Internet. Moreover since our thesis is based on qualitative data and researches, it was important for us to use databases but also the Internet to have a large view in order to answer our research question. We also used some books to develop some concepts. In particular the concept of decision making process, from the book of Salomon M. R. 2004), Consumer behaviour: buying, having, and being that is an important source for us in order to understand the attitude of the consumer. 2. 7. 1 Critiques of Secondary Sources Secondary data used for our subject are, for most of them coming from scientific articles that, even if they can be quite recent, are sometimes old or obsolete because of the fact that the sectors we have studied that is to say the Internet and the luxury have respectively known a lot of evolution and changes these last years. In particular for the definition of luxury branding, we have built our definition on authors that have written their articles during the 90? ; (however certain articles are considered as references for this definition). That is why we decided to use some Newspaper articles in our theoretical framework. Indeed data presented in this kind of article can be seen as an update and additional information that make our theoretical part clearer, more current and updated. Concerning the use of scientific articles about the Internet and the relation that can exist between luxury brands and the use of the internet as a marketing tool, it is important to notice that these articles can become easily obsolete.
Indeed due to the fact that the internet is a technology that evolves very quickly, the articles we used can become old-fashioned in few months or years. That is why we sometimes use some newspaper references to be complete in the theoretical framework. Some of the newspaper articles we used are from French newspapers. So the translation we made in English could bias the meaning of the original article even if we tried to transmit exactly what it was written.
Another critique could be that since Charlotte Larbanet had written a thesis on the subject of “Internet” and “luxury” for a previous thesis, we have taken her references as a departure and 19 then widen our research. Maybe we should have found information without her sources at the beginning and use them after first researches. However the sources used from the previous work of Charlotte Larbanet stay relevant and key for our thesis. Moreover, we have used the Charlotte? s Bachelor thesis as a point of start for our thesis. The Bachelor thesis deals with the Internet? assets and drawbacks from a luxury brands? point of view. We used it for the background of our Master thesis as well as a first point of reflection. 2. 8 Reliability In order to evaluate a study, the best ways according to Bryman et al. (2008) are the three following criteria: the reliability, the replication and the validity. We will focus our attention on the reliability and the validity for our study. Reliability deals with the question to know if the analysis and conclusions of a study can be “repeatable” (Bryman et al. 2008, p31) Reliability is concerned with the idea of which procedures and techniques to collect data is better to have “consistent findings” (Saunders et al. , 2007, p149). Saunders et al. ask three types of questions: ? ? ? Will the measures yield the same results on other occasions? Will similar observations be reached by other observers? Is there transparency in how sense was made from raw data? Concerning our thesis, the data and results we have found are reliable due to the fact that we have based our data collection and analysis on a list of criteria for the auditing the websites.
There is always a part of subjectivity on the choice of the criteria, so the study can be influenced by our feelings and knowledge about the subject. That? s why we think that even if our findings are reliable, they could have been quite different if other observers had made the same study. The analysis is also transparent due to the fact that we used the same criteria to make the observations on the websites and for the analysis. 2. 9 Validity Validity is concerned with the idea of knowing if the conclusions and findings are correct, and “if the findings are really about what they appear to be” (Saunders et al. 2007, p150). According to Bryman et al. (2008, p. 32), we have four kinds of validity that are the measurement validity, the external validity, the internal validity, and the ecological validity. Quantitative researches are mainly concerned with the causality measure and the generalization measure according to Bryman et al. (2008). That? s to say that quantitative researches are mainly concerned with the internal validity and the External validity. Since we have focused our attention on a certain type of luxury brands that is to say fashion luxury brands, we can only apply our results to these same brands.
If we have wanted to generalize our results to all the fashion luxury brands, we should have taken a larger sample of fashion luxury brands. So we can only say that the study can provide an insight on how luxury websites can be possible designed. 20 2. 10 Limitations As a lot of business and social studies, our paper speaks about an ongoing subject. Indeed, the evolution of the use of the Internet by the luxury brands as a marketing tool, as we will see, evolved quickly since 2000-2005. Nowadays, new changes are currently done again in the online relationship and marketing techniques.
The web experience is a dynamic. But, in order to correctly study it, we need to stand back too really appreciate what happened since few months. For this reason, we would like to precise here that our paper is about a new and ongoing phenomena between the Internet and luxury brands. We drew up here a picture of this relationship that should be understood by readers as condition of things at the end of 2008 and at the beginning of 2009. It is totally possible that our paper will be out-of-date in only few months. 21 Chapter Three: Theoretical framework
Our literature review consists of three parts. The first part aims to give the reader information about the characteristics and definitions of the luxury industry. It permits to lighten what are exactly the particularities of this specific sector. The second part of the theoretical framework gives definitions about some important Internet? s concepts and online marketing tools. Thus, firstly two traditional formats of websites are distinguished and presented in order to avoid frequent ambiguity. Secondly, tools and concepts of e-marketing are defined to make the following part simpler.
And finally, the third and last part of the literature review presents which elements of a website should be took care of in order to allow luxury brands to guarantee to their online customers a luxurious atmosphere and an experience of privileged really close to the one that they already provide in their physical stores. This third part also explains to the readers why now, after a delay to finally use this information technology due to persistent fears, luxury brands can after all use the Internet as a rich and powerful media.
General theories on marketing in the Internet are presented, and then narrowed down to the possibility to use the Internet tools to build a luxury online experience very similar to the customers? experience in physical shops. 3. 1 Luxury definition 3. 1. 1 Luxury sector? s definition A general definition for the luxury doesn? t really exist. First of all we can give some adjectives to define what is commonly understood by luxury: sophistication, costly, sumptuous, and exceptional. According to the Larousse Dictionary (www. larousse. fr), the word “luxury” is defined as something which is expensive, refined, and sumptuous.
It is an environment established with expensive items, a refined and costly way of life, a relatively expensive pleasure that someone offers to himself without any real necessity. Lastly, it could be also what someone does in an exceptional way and for his pleasure. Many authors have tried to give a definition of luxury. Indeed, Dubois (1991) explained that the luxury can only be defined partially. From an economical point of view, luxury is characterized by a high price and from a sociological one it is an indicator of social status. Nueno and Quelch (1998) defined luxury as an intrinsic and an immaterial quality at once.
Thus, they defined the luxury industry as a sector providing a consistent delivery of very good quality products, a heritage in the savoir-faire and craftsmanship in a relative small production (Nueno et al. , 1998). An important point that describes what is luxurious is rareness and exclusivity. Phau and Prendergast (2001) called it the “rarity principle”. Luxury is a subjective concept that they defined in this way: “luxury brands compete on the ability to evoke exclusivity, a well-known brand identity, […] brand awareness and perceived quality” (p. 123-124).
According to Dubois and Paternault (1995) considered that luxury is well associated with the world of “dream” more than the idea of high price. Dubois et al. (1995) underlined the contradiction of this specific industry. Indeed, the aim of this sector is to sell products but not too much, or more or less in limited quantities. As we 22 have seen before, luxury industry offers the exclusivity to its customers. Thus, if a product is sold in a too important number, the luxury market is no longer a market niche, the brand image turns sour, the consumer „cold shoulder? he brand and the product loses its value at the customers? eye. This is why the luxury sector has to keep equilibrium between the number of sales and the luxury brand image. Thus, small quantity of sales is compensated by a high price (Dubois et al. , 1995). Even if there are different definitions of the luxury industry, there are common characteristics given by the majority of interested authors like high price, exclusivity, and prestige. Luxury is handcrafted and of high quality. It is associated to a well-known brand identity.
In order to preserve these characteristics, the luxury industry has to only sell in little quantity. 3. 1. 2 The customers purchase motivations for luxury products According to Corneo et al. (1997), the motivation can be of two different types: personal and interpersonal motivations. A customer can buys luxury products because of personal motivations. Indeed, personal concerns like pleasures, emotions and aesthetic researches cheer this consumption. Customers want to live experiences with these luxury products in order to create a dream in their lives (Corneo et al. , 1997).
This personal motivation is clearly based on the possession act and on pleasure (Vickers et al. , 2003). And Dubois et al. (1995) have shown that the luxury visions had change with the time and differ according to cultures. They underlined that in France the vision of pleasure becomes more and more present (Dubois et al. , 1995). However, there are also interpersonal motivations in the luxury consumption. This motivation permits a consumer to show that he belongs to a group or a social class (Vickers et al. , 2003). In the case of conspicuous consumption, the brand? logo could be more important than the product itself because it permits the identification by others. It becomes materialism (Corneo et al. , 1997). Vickers et al. , (2003) have identified a third category of motivation for luxury purchase: a functional motivation. This type of motivation is purely functional as product? s quality. The consumer wants the product to be useful, to solve a problem. There are many different types of motivations that lead customers to buy luxury products. They research pleasure, experience but also a social identification. Luxury is the averse of ordinary needs, it is wants. . 1. 3 Luxury brands? characteristics There is not luxury product without luxury brand name. Each product bearing a luxury brand? s name or logo is a luxury product. So, what are the characteristics of a luxury branding? According to Robert Reppa et al. (2007), a luxury branding offers a high quality product associated to a superb level of service. In order to attain a good customer satisfaction, these luxury brands are concentrated on four main points. The first goal is to create a “customer-centred culture” at different levels (Reppa et al. , 2007, p. 2).
It means identifying and using the service provided around the product itself as a key part of the creation of value of the product. The second point is to choose and select the best staff to sell the product. Indeed, the staff is the interaction “medium” between the customer and the brand (Reppa et al. , 2007, p. 2). The relationship between customers and staff is a key point during a purchase of a luxury good. Then, a luxury brand has to retrain employees in 23 order to help them to be at their top (Reppa et al. , 2007, p. 2). The last and fourth point is to measure the customer satisfaction and needs in order o improve continually the service provided. The first and the last point can be linked due to the fact that in order to create a “customer-centred culture”, a company needs to know the satisfaction level of the customers in order to improve itself. Always according to Robert Reppa et al. , (2007), “when employees recognize that they are valued and share in the rewards, they can commit themselves to customer satisfaction” (p. 6). So the luxury brands, showing gratitude to its staff, motivate them to contribute to the customer satisfaction and loyalty.
When a luxury branding masters implementing these four principles (a customer-centred culture, to choose and select the best staff, to retrain employees, and to measure the customer satisfaction and improve continually provided services), the result is a combination of high quality products and services provided. This process leads to strong sales and better brand image. To conclude, a luxury company can be defined as a company for which the product is not the aspect the most important. Indeed, all companies are focused on product but what is really important for a luxury brand, is to be centred in services that come along the product.
These services could be customer reception, advice or a real relationship between a client and salesmen that lead to a better service offer. Because it is a sector out of the ordinary, it needs a special attention from marketers. Both in traditional stores and in online shops, the luxury identity of a brand has to be respected and a high service level have to be provided to customers. And online marketing tools could be helpful to web-marketers in their online marketing strategy implementation. 3. 2 The online marketing tools
In this part, traditional formats of websites are presented in order to permit a nicer following reading. Then, marketing concepts like branding, viral marketing, word of mouth, relationship management and customer relationship management are defined. Once all these concepts lightened, any possibility of vocabulary problem will be eliminated for the rest of the thesis reading. 3. 2. 1 Traditional formats: e-business and e-commerce The Internet was firstly used in a business context before a personal one. That means that companies were the first to understand all the possibilities offered by this international network.
The Internet represents from a marketing point of view both opportunities and challenges for companies of all sizes (Melewar et al. , 2003, p. 363). It is nowadays considered as a powerful communication channel and it has formed a part of the marketing mix giving the possibility to a company to accomplish an online marketing campaign (Melewar et al. , 2003, p. 364). The fast proliferation of information online to a huge number of people permits to offer more information about products or services in order to add value to online customers (Melewar et al. , 2003, p. 363).
The Internet allows a brand to easily identify, target and reach both existing and potential customers (Smith et al. , p. 19, 2005). But in another hand this media is accessible to everyone and it could lead to a bad campaign made by unhappy customers (Szmigin et al. , 2005, p. 481). Moreover the Internet can be used also as an attractive distribution channel because it permits to simply eliminate distribution costs and so increase margins (Melewar et al. , 2003, p. 364). 24 In literature, electronic business (e-business) and electronic commerce (e-commerce) are sometimes used interchangeably and some other times distinguished.
In the case where these two terms are seen as similar, e-business and e-commerce are defined as “any «net» business activity that transforms internal and external relationships to create value and exploit market opportunities driven by new rules of the connected economy” (Damanpour, 2001, p. 18). But in some literature, those two terms are distinguished. 3. 2. 1. 1 E-business The term e-business is defined as the use of the Internet in order to connect customers, suppliers, employees and other stakeholders with the organization via a website in order to exchange information about its products and policies (Rodgers et al. 2002, p. 186). It is a perfect medium in the case in which a brand wants to use the Internet in order to inform its customers. Thus, Internet users can find a lot of information given by a firm about its brand, its activities, its products or its services… In this e-business website, information is controlled by the brand itself. This type of website can have many good consequences for a company. For example, it gives the possibility to provide a superior customer service that increases customers? satisfaction and their loyalty (Melewar et al. , 2003, p. 363).
It also improves the relationship between a company and its suppliers that permits to increase the speed of an order and to enhance business? performances (Rodgers et al. , 2002, p. 186). To conclude, this type of website is an online magazine that permits to put future consumers at rest and the reinforcement of the brand? s reputation and image. It always returns you to brands shops for the purchase act. 3. 2. 1. 2 E-commerce E-commerce refers to online selling and purchasing activities including money transaction like online payment, and tracking delivery (Rodgers et al. 2002, p. 186). Thus, e-commerce uses the Internet in order to connect customers with a firm in order to distribute products and services online. A company can choose to sell directly a part or the totality of its products or of its services online to its final customers. The Internet can be used as a unique or as a complementary distribution channel. It permits to decrease distribution costs like salesperson salary (Melewar et al. , 2003, p. 364). It is possible that an e-commerce website both provides information and sells products/services to customers.
In short, the term e-business includes the term of e-commerce. Thus, an e-commerce site is also an e-business site but an e-business site is not necessarily an e-commerce site. The distinction between e-business and e-commerce and their characteristics show pretty well that the Internet could be used either as a distribution channel or a communication medium according to the brand? s online strategy. Some luxury brands have chosen to be present online through an e-business website in order to only provide important information to online customers and suppliers. Others made the choice to sell online.
The principal is to be in adequacy to the identity of the luxury brand. In the continuation of our thesis, we have chosen to only concentrate on the luxury brands that sell online a part or their entire collection. 25 3. 2. 2 Branding and identity Identity of a brand is a combination of its “functional and emotional values” (Chernatony, 2001, p. 193). A brand can be defined as “a name, term, sign, symbol, or design, or a combination of these, intended to identify and differentiate the goods or services of one seller from those of competitors” (Mascarenhas et al. , 2006, p. 399).
In the online marketplace, a corporate brand identity is a cognitive secure and a point of recognition for customers with uncertainty feelings (Javalgi et al. , 2005, p. 666). A brand that already exists in a traditional way with physical shops can also exists online using the same brand essence and providing the same values (Chernatony, 2001, p. 193). A coherent atmosphere between the real stores and the online shop has to be respected. For many Internet companies, the brand name is also the company name (Javalgi et al. , 2005, p. 666). The brand? s value can be preserved online by the website? design keeping the brand? s colours for example. The brand? s website needs provide the same feelings to traditional and online customers. 3. 2. 3 Viral Marketing and Word of Mouth Emanuel Rosen (2000) defined Buzz as “all the word-of-mouth about a brand” (p. 7). It? s the “aggregate of all person-to-person communication about a particular product, service, or company at any point in time” (Rosen, 2000, p. 7). This free communication about a product from customers to their friends and acquaintances has a great power to lead to a success and avoid spending a lot of money in expensive traditional campaign.
This word-of-mouth will be more reliable than other information that customer get through ads because he learns it from a peer or someone he trusts in (Salomon, 2004, p. 379). According to Ferguson (2008), viral marketing campaigns are the cause and the word-ofmouth/Buzz is the effect. Viral marketing campaign builds product/brand awareness and Buzz. Word-of-mouth leads potential customers to test and purchase (Ferguson, 2008, p. 180). Moreover, this viral marketing technique knew a real expansion with the Internet development because this information technology connects and encourages web users to talk about their experience.
Thus, thanks to propagation of blog, forum, video-sharing websites and social networking, this word-of-mouth technique became really powerful. It is so many ways to link customers and give them the possibility to speak about their product of brand experiences (Ferguson, 2008, p. 180). But in another hand, this technique can turn against ebrands. A negative word-of-mouth has the power to reduce the firm? s advertising impacts and to modify the consumers? attitudes toward a brand or a product (Salomon, 2004, p. 382). But viral marketing strategy is not a good way to connect a brand with their customers.
There is no conversation between brand and customers (BtoC) through this technique but only between customers (CtoC). Viral techniques are only good to stimulate awareness and trial. Word-of-mouth influences around two-thirds of personal purchases (Salomon, 2004, p. 379). In order to build a kind of relationships between the brand and customers, identification like an email address is needed in order to build a harder bond (Ferguson, 2008, p. 181-182). This is part of the relationship marketing techniques that is easily implemented online. 26 3. 2. Relationship marketing 3. 2. 4. 1 Definition Relationship marketing is defined by Wilson et al. (2008) as “a strategic orientation that focuses on keeping and improving relationships with current customers rather than on acquiring new customers” (p. 152). This definition is based on two ideas. The first is the fact that customers prefer to build long-time relationship with a brand than to each time have to change of brand in order to find the best one. And the second is that it is less costly for a firm to retain actual customers than to attract new ones.
Both parties in the customer-brand relationship will benefit from customer loyalty (Wilson et al. , 2008, p. 157). To attract and retain customers there are three main strategies. The first one consists in provide a better product or service than competitors (Wilson et al. , 2008, p. 157) to satisfy customers. The second strategy is to put high switching costs that include investment in time, money and effort like searching costs (Wilson et al. , 2008, p. 158). The third and last strategy is to build relationship bonds with current customers.
These bonds can be of different natures: financial (preferential prices for rewards), social (personal relationships), customization (oneto-one solutions) and structural (process improvement) bonds. 3. 2. 4. 2 Relationship benefits for customers According to Colgate et al. (2005) and Wilson et al. (2008) customers benefit from long-term relationships. If a customer receives more than he gives in a relationship, he is more likely to stay (Wilson et al. , 2008, p. 157). They underline three relational benefits and sometimes these benefits keep customers loyal more than the products or the services provided (Wilson et al. 2008, p. 157). The first benefit is “confidence benefits”. These benefits include the decreased anxiety and the comfort that feel customers because they know what they have to expect of the situation (Colgate et al. , 2005, p. 427). According to Wilson et al. , these confidence benefits seem to be the most important for customers (Wilson et al. , 2008, p. 157). The second relational beneficial effect is the “social benefits”. This refers to the emotional part of a relationship. It is the fact that customers and employees, over the time are building bonds, creating friendships and recognize themselves (Colgate et al. 2005, p. 427). This is a powerful factor to prevent customers switching brands (Wilson et al. , 2008, p. 157). So as we have seen, these two first types of benefits have direct impacts on the customer loyalty and it leads customers to use word-of-mouth to inform their peers about their nice experience (Colgate et al. , 2005, p. 427). The last one is the “special treatment benefits” and embraces the special favour that a customer can get like price breaks or additional services (Colgate et al. , 2005, p. 427). 3. 2. 4. 3 Relationship benefits for firms According to Wilson et al. 2008), the benefits for firms to develop customers? loyalty are numerous. Firstly, there are “economic benefits” for them (p. 158). The customer retention 27 leads to increased purchases and it is truer with time (Wilson et al. , 2008, p. 158). It also leads to lower costs like less marketing or advertising fees. That is why we can say that retain current customers is less costly than attract new ones. Then there are “customer behaviour benefits” (p. 159). Loyal customers are happy of the service provide by a brand so they will make free advertising among them speaking about their nice experience (Wilson et al. , 2008, p. 159).
In addition of this word-of-mouth activity, they can also speak about it online via blogs, forum or chat rooms. Through communities around the brand, loyal customers can provide positive information about it and encourage other Web users for trial (Wilson et al. , 2008, p. 159). The last benefit for firms is the “human resource management benefit” (p. 159). This benefit explains how a loyal customer can contribute to facilitate and make easier salesperson? s jobs and thus leads to employees? retention (Wilson et al. , 2008, p. 157). Moreover, as customers, employees will receive social benefits building bonds with customers.
Fig. 1: Relationship Marketing Benefits For customers • Confidence benefits • Social benefits • Special treatment benefits For firms • Economic benefits • Customer behaviour benefits • Human ressources management benefits Thus, relationship marketing is a powerful tool for firms to develop and build customers? loyalty. And, this technique has many other advantages for both customers and firms. Loyal customers are confident toward the brand. They build bonds with it and get preferential treatments. Firms with loyal customers make savings on marketing and advertising spending; make nicer the employees? obs and so save money on recruitment, and human resource management. This relationship marketing has to be also implemented online by luxury brands in order to get these same advantages. To do so, e-marketers can use online customer relationship marketing to build bonds between online customers and luxury brands. 3. 2. 5 Online Customer Relationship Management (e-CRM) The Internet has an important power to improve Customer Relationship Management. CRM is one of the best competitive advantages that permit to avoid customers switching to other competitors? stores (Kimiloglu et al. , 2009, p. 247). “A successful CRM strategy involves 28 ntegrating the „fulfilment of customer needs? as a strategic goal within the firm? s core business processes across the entire organization” (Javalgi et al. , 2005, p. 664). Thus, the customers have to be at a central point of attention in the organisation? s process. And because it costs less to companies to keep current customers than to attract new ones, they must work hard to develop their customer loyalty toward the brands (Lee-Kelley et al. , 2003, p. 240). The loyalty is defined as “repeat purchase behaviour” that can directly be linked to sales and profitability (Feinberg et al. , 2002, p. 32) or as an intangible asset discouraging customers to “switch to competing brands” (Mascarenhas et al. , 2006, p. 398). And in order to improve it, companies have the possibility to use e-CRM. E-CRM is defined by Lee-Kelley et al. (2003) like the “marketing activities, tools and techniques, delivered over the Internet with a specific aim to locate, build and improve longterm customer relationships to enhance their individual potential” (p. 241). Through this definition it is easily understandable that company can build one-to-one relationship with each one of their customers in order to increase value for both of them (Javalgi et al. 2005, p. 665). So, e-CRM, as CRM, is a win-win strategy. It provides more value for customers and a competitive advantage for business (Kimiloglu et al. , 2009, p. 247). In order to achieve each of the outcomes of the customer acquisition, retention and extension, there are several Internet marketing techniques available to e-brands (Chaffey, 2000, p. 53). Fig. 2: Customer Relationship Management Goals ACQUISITION RETENTION EXTENTION 3. 2. 5. 1 Acquisition Once a customer is visiting a brand? s website, it is important to provide him the desire to engage in a dialogue with the brand.
During this dialogue, the minimal information collected has be an email address which will be then used to continue the dialogue in a long-term. During this following exchange, the brand has to obtain enough information about the online customer in order to know at least its preferences about products and its demographics data (Chaffey, 2000, p. 54) to build an accurate profile of him (Melewar et al. , 2003, p. 364). This information will then impact on the next stage, the retention of the customer. 3. 2. 5. 2 Retention This stage has two main goals. The first is to limit the customer to purchase competitors? roducts and the second is to attract repeat visits to the brand website in order to continue the exchange of information and offers (Chaffey, 2000, p. 54). In order to retain a customer, the website needs to be often updated with strong contents in order to provide fresh information at 29 each customer? s visit. This update can be divulgated through e-mails, newsletters, extranet, RSS or online communities (Chaffey, 2000, p. 55). Customized offering can be made thanks to previously collected data and a strong positive and trusting (Smith, 2005, p. 21) customer relationship can become and be developed (Melewar et al. 2003, p. 367). 3. 2. 5. 3 Extension This stage has the aim of “increasing the value of the customers to the brand by encouraging cross sales” (Chaffey, 2000, p. 55). During this stage the brand send e-mails to the customer in order to inform him about new products available and promotions to lead him to come back to the website and make purchase. This direct e-mail represents a stimulus for the e-customer to maintain a long-term relationship (Smith, 2005, p. 23) but it must not be use too often in order to not be considered like spam (Chaffey, 2000, p. 55).
In another hand, “a customer authorized e-mail demand builds trust, develops loyalty, and creates value” (Javalgi et al. , 2005, p. 668). An e-CRM implementation permits to e-brands to create directly more satisfied and also more loyal customers (Lee-Kelley et al. , 2003, p. 246). E-CRM allows e-marketers to provide online interactivity which permits e-brands to better match customer needs, wants, and preferences (Javalgi et al. , 2005, p. 668). A better satisfied customer leads to much more frequent transactions (loyalty) and so a much higher profit (Kimiloglu et al. , 2009, p. 59). Through all these definitions, we have clearly explained what the Internet particularities in terms of marketing tools were. Firstly, the Internet permits to create online the same brand identity that in traditional stores. Secondly, despite a lack of physical relationship between brands and customers, the Internet has many ways to build bonds between them. Thus, in a luxury context, online customers, thanks to its personal data and preferences, receive customized offers and have the impression to be privileged. They are satisfied and so loyal to the luxury brand.
But, in order to reach this relationships and loyalty, luxury brands have to pay attention to the Web experience that they offer to their online customers. 3. 3 Internet and luxury brands: the Web experience Nowadays, the Internet became a tool that cannot be ignored by companies. The great majority of physical brands have already created their own website, either an e-business or an e-commerce website. Moreover some firms without physical shop sell their products or service only online. The Internet is their unique distribution and/or communication channel.
Few years ago it was not the case for the luxury industry. Indeed, luxury brands were afraid to use the Internet. It was explained by many fears that they shared about this communication tool. Luxury brands saw the Internet as a mass and incontrollable media as well as a counterfeit distribution channel that could completely destroy their brands? image. Moreover, they believe that an e-commerce website could create cannibalisation with traditional stores. Furthermore, it obliges them to reveal their price that permits quick online comparison with competitors.
Lastly, the use of the Internet was seen has a media that cannot, under any circumstances, substitute the human relationship and the pleasure purchase in traditional store. But with time, the luxury industry understood that the Internet has finally many advantages for this particular sector. The Internet is practicable for online customers that are afraid or 30 cannot to come in a traditional point of sell. It is also a money-saving distribution and communication channel because costs are less high than in traditional channels.
The internet permits moreover to give much more information to many people at the same time. And lastly, it allows a high services offer to online customers like customization of some products, online payment and delivery. At the present time, all these assets and the passion for this mass medium have created a huge online competition. In front of this, luxury firms have to find a competitive advantage in order to stay visible, to continue to attract customers and to survive among all these websites.
One of the possible competitive advantages that they can get is the power to help customers to get over the decision making process in a faster way in order to improve his purchase decision probability (Constantinides, 2004, p. 111). According to Atwal et al. (2008), experiential marketing is all the “marketing initiatives that give consumers in-depth, tangible experiences in order to provide them with sufficient information to make a purchase decision” (p. 4). This information research step is more or less important according to the customer? s involvement and the product characteristics (Chen, 2001, p. 291).
The customer involvement is defined by Salomon (2004) as “the motivation to process information” (p. 125). When a product is expensive and its purchase infrequent or risky, the customer will be more involved in the information process (Chen, 2001, p. 291). This is the case for luxury products so customers are highly involved and luxury websites have to really pay attention to the information quality and availability in order to help them to make the good decision. In this type of marketing, customers are involved and work with brands to create a unique experience around the brands and its products or services.
The Internet is a great tool in order to create this experiential marketing (Atwal et al. , 2008, p. 7). The concept of the 7Cs was developed in order to help luxury brands to understand how to create a “high impact digital customer experience”: Content, Customisation, Customer care, Communication, Community, Connectivity and Convenience (Atwal et al. , 2008, p. 7). In another hand, Constantinides (2004) describes a Web experience thanks a mix of four main elements: technology, interactivity, trust, and service (p. 117).
By changing these four factors, luxury brands can modify and so create the best experience for their online customers. And because in the online market, there is no direct relationship between customers and firms while it is so crucial for the luxury industry, e-marketers have to take care over luxury websites? appearance. 3. 3. 1 The technological elements The technological factors? goal is to provide online customers with a nice and practical application, easy to understand and to use even if it is their first visit. Moreover, the website? s atmosphere needs reflect the luxury brand identity.
On the contrary, a customer won? t stay a long time before to switch and visit competitors? websites (Constantinides, 2004, p. 117). It includes usability and aesthetics levels of the website. 3. 3. 1. 1 Usability The first thing Internet users want when they visit a website is to easily and quickly find where information are, where they can see products and how they can buy it. It is important to notice that Web users don? t really read electronic contents; they scan it (Chernatony, 2001, 31 p. 187). It is why information has to be easy to find on webpages using key words for example.
Constantinides (2004) calls it “convenience” (p. 117). This factor is much more important for the luxury industry because customers are more highly involved in the information research. Indeed, as we have already explained, more a product is expensive or a purchase unusual, more the customer is involved in the information research step. In order to help customers to find information, Web designers can put in place search engines directly into the website in order to improve the site navigation and lead online customers quickly to the webpage they are searching for.
In the same type of irritation, Internet users want to order quickly. The security checkout for online payment has to not take too much time (Constantinides, 2004, p. 118) because online, customers are impatient. 3. 3. 1. 2 Aesthetics According to Constantinides (2004, p. 119), aesthetic is the most important factors to judge about the credibility of a website for Internet users. Web designers have to create a great online atmosphere in order to attract online customers and give them the desire to stay and search information which they need, and perhaps make a purchase.
Like in traditional retailers, the shop atmosphere is really determinative to provide a perfect experience to customers (Constantinides, 2004, p. 119). Firms that have traditional shops need to keep the domain name of course but also the color chart and the site layout for their websites in order to keep a certain consistency between their marketing strategy offline and online (Constantinides, 2004, p. 120). They have to feel good online, visiting page by page as if they were walking between sections in a real shop. The design and the style of the website have to attract and keep the Internet users? ttention because more online customers stay connected to the website and more there is a chance that they buy something (Park et al. , 2003, p. 535). About the luxury industry, in term of design, style, interactive features, and technologies use, the customers have really important expectations. They want to find online the traditional and luxurious brand identity. Many technologies offered by the Internet allow luxury brands to suggest a very nice and clear website and e-shopping website to its visitors. Flash Technology, videos, high quality pictures, “sophisticated illustrations” (Dall?
Olmo Riley et al. , 2003), sounds… All these Rich media are interactive solution to create online the traditional store atmosphere. In a e-commerce website, it permits to provide information through a new way, a video shooting a salesperson giving information about a product or 3D pictures presenting products from different viewing angles (Varandat, 2001). But to obtain perfect result, the luxury brand? s website may keep the world of the luxury brand. Slogan, 32 colours, products presentation…, in short, the identity of the luxury brand have to be present online (Chernatony, 2001, p. 93). Graphic artists have to keep the brand? s criterions to give the feeling to be in a real store of the luxury brand. A lot of pictures of the products, videos help to compensate the absence of the touch possibility (Chernatony, 2001, p. 193). The technological factors, as we just have seen, are some of the great elements to build online a real luxurious web experience for online customers. Indeed, the website? s usability can be easily improved in order to quickly and nicely lead customers to the wanted information or product.
Moreover, the aesthetics touch thanks to rich media permits to keep online the same luxurious brand? s identity that in traditional shop. Thus, online customers are attracted and then retained by the beauty of the website. They can now enjoy an online luxurious atmosphere. 3. 3. 2 The interactivity The Internet permits brands to go from a push media to a pull medium of communication. Indeed, on the other traditional media, it was always the brand that was talking to its targets. Nowadays, it is more the online customers that want to engage in a dialogue with a brand (Chaffey, 2000, p. 0). It is a double-way relationship that is permitted thanks to the Internet media. Indeed, the interactivity permits to improve the web experience by offering customized services, interaction with vendors like in real shops and with other online consumers. Thus, “in cyberspace, consumers interact with both a brand and the site? s community” (Chernatony, 2001, p. 187). 3. 3. 2. 1 E-CRM Firms present on the Internet collect the consumers? characteristics like his demographic, social, economic and cultural data, which companies cannot modify.
They have also the history of previous interaction if the customer already came to visit the website before. Customer Relationship Management software permits brands to collect and then to use those demographic and previous interaction data in order to obtain the best profiles of its customers. After that, it permits to provide them the best experience and develop a more positive and trusting relationship (Smith et al. , 2005, p. 21) by offering better customer service and customized offerings (Melewar et al. , 2003, p. 363). The Internet is nowadays a powerful CRM tool for any brand present online.
It gives them the possibility to better understand their customers, serve them, inform them and converse with them (Tarby, 2009). And because for the luxury industry, service levels and relationship are the most important elements, to get this type of information, understand it and use it in order to get a clear image of their customers, increase interaction with them, to provide them a perfect online experience (Melewar et al. , 2003, p. 365) is the best strategy. It permits then to build trust and confidence so important online (Constantinides, 2004, p. 12) and to improve the online customers? satisfaction and loyalty (Smith, 2005, p. 23). 3. 3. 2. 2 Online interaction with vendors The most important difference felt by customers between a traditional store and an online shop is the lack of physical interaction (Colgate et al. , 2005, p. 428). This lack leads online consumers to an uncertainty and it is truer again about luxury shopping because of their high 33 level of involvement. Thus, in order to improve customer experience, luxury brands need limit this online uncertainty. In order to fill in this need of rust, online customers can have access to one or several possibilities of interaction with online vendors in order to help them all along their e-visits (Chaffey, 2000, p. 49). An online help-desk for technical assistance, a store? s e-mail address, an instantaneous reply system directly from the website or a hotline to ask questions directly to a physical person (Kimiloglu et al. , 2009, p. 251) are many examples tools that permit to online customers to have access to almost all the services provided in traditional shops (Drennan et al. , 2003, p. 296).
Thus, Web users can also get information, advices, customer services and after sales service. Luxury brands try as well to build some bonds between them and their online customers in order to hold them longer. Online customers can subscribe to newsletters in only few clicks. This is called “permission marketing” (Salomon, 2004, p. 256) and is based on the idea that marketers have the approval of Web users to send them communicative messages. This technique guarantees better results because these receptors are more receptive than others. Thus, online customers become members of the brand and so get some privileges.
They also can obtain some advices adapted to each of them, personalized offers… It can increase the development of the customers? loyalty or improve the awareness of a brand. According to Dall? Olmo Riley et al. (2003), the relationships with the customers can be built through the Internet thanks to newsletters and forums. 3. 3. 2. 3 Online relation with other Web users Another way to reduce uncertainty and improve the online luxury experience is to give the possibility to luxury brands? customers to be in relation with other Web users. This customer to customer (CtoC) network is part of what is called “Web 2. ”. The term Web 2. 0 was used for the first time in 2001 by Tim O? Reilly, the founder of the American society O? Reilly Media Inc (O? Reilly, 2005, p. 1). He has noticed that the Web had evolved and has a more important form than ever with exciting new applications and websites. O? Reilly (2005) had defined Web 2. 0 as “the business revolution in the computer industry caused by the move to the internet as platform, and an attempt to understand the rules for success on that new platform. Chief among those rules is this: Build applications that harness network effects to get better the more people use them” (p. ). So, we are speaking about an evolution of the Internet. Web 2. 0 has to be seen has a channel of communication (Levy, 2007, p. 122) or as a platform that is used by Internet users like an exchange base (Cavazza, 2005). There is a notion of collaboration in Web 2. 0. As examples of this Web 2. 0 evolution, we can give mainly three websites which were precursors in this collaboration between websites and Internet users: ebay? s, Amazon and Wikipedia. These three websites take advantage of the source of web 2. 0, the Internet users? ontributions and use it as online competitive advantages (Cavazza, 2005). Thanks this type of applications, online consumers can have access to a lot of information about culture (Wikipedia), and products features and quality (Amazon), but also about sellers seriousness (ebay? s) from previous customers? experiences (Chen, 2001, p. 288). But the Web 2. 0? s principles can also be defined by several other popular applications. These applications are more used by individual Internet users (CtoC) but could also be used by companies (Business to Customer and Business to Business). Blogs, YouTube, RSS and 34 ocial networking like Facebook or MySpace are four examples of this customer to customer (CtoC) online interactivity and community. These applications permit to share information, pictures, music, and videos among friends or simply among Internet users. It gives the possibility to online consumers to reduce their uncertainty about an expensive purchase by finding relevant and objective information about a brand or a product given by other online consumers (Ind et al. , 2001, p. 9). It also permits brands to build communities around their brand identity and to easily communicate toward them (Chen, 2001, p. 295). According to Salomon (2004, p. 84), a community is a web group where members share views and product recommendation online. Lastly, it is a good way for online brands to engage people in dialogue, to take advantages of possible negative feedbacks given by furious consumers using it to adapt and adapt their customer services (Ind et al. , 2001, p. 9). Fig. 3: The Interactivity Interactivity: dialogue, not monologue Company Consumer Two way feedbacks So, the Internet encourages and permits the communication between the brand and the customers but also between online consumers. Many luxury brands propose to Internet surfers to subscribe to a newsletter in order to build