GLOBAL LUXURY FASHION BRANDS MANAGING BRAND EQUITY ON SOCIAL MEDIA - A study of Danish consumers' use of Facebook and Instagram in the decision-making process Master’s thesis February 15th, 2016 Copenhagen Business School Cecilie Brendstrup Holten Trine Brix Olsen Ann-Sophie Hørgreen Lind Cand.ling.merc. Cand.merc.(kom.) Cand.merc.(kom.) Supervisor: Margit Neisig 150 pages & 356,636 characters Resumé Globale luksus-modebrands’ strategiske tilgang til brand equity på social medier - Et studie af danske forbrugeres adfærdsmønstre på Facebook og Instagram i beslutningsprocessen Medielandskabet er under forandring. De traditionelle kommunikationskanaler, som virksomheder førhen har benyttet sig af, er i opløsning på grund af en ændret mediaadfærd hos forbrugerne. Forbrugerne tager gradvist afstand til de traditionelle medier til fordel for de sociale medier, som nu er blevet en naturlig del af deres hverdag. Dette gør sociale medier til en kommunikationskanal som virksomheder i dag ikke kan ignorere. Dette faktum er anerkendt af langt de fleste brands, men for særligt én industri giver dette udfordringer. Den globale luksusindustri oplever en utilstrækkelig viden og erfaring med at inkorporere social medier i deres brand management strategier. Denne kandidatafhandling har derfor til formål at undersøge krydsfeltet mellem sociale medier og luksus brand management med et mål om at øge forståelsen for hvordan globale luksus-modebrands kan skabe brand equity på Facebook og Instagram. Dette krydsfelt belyses via en kombination af teoretiske felter inden for brand management, luksus management, sociale medier og forbrugeradfærd. Ifølge eksperter er det nødvendigt at forstå forbrugeren for at opnå effektiv kommunikation på digitale platforme. Forståelsen af danske luksusforbrugere er i denne afhandling genereret via en forståelse for forbrugeres beslutningsproces og deres underliggende behov, motivationer og forventninger. En ny kombinationen af velkendt teori bidrager til at generere viden i et endnu uudforsket område. Funderet i afhandlingens socialkonstruktivistiske ståsted, er der foretaget tre primære kvalitative empiriske dataindsamlinger samt én understøttende kvantitativ dataindsamling. Dette har resulteret i et kombineret metodisk design i bestræbelsen på at opnå en trianguleret afdækket forståelse af vores undersøgelsesfelt. Det metodiske design består af to ekspert interviews indenfor hhv. luksus brand management og social medier, et casestudie af luksus mode-brandet Chloé og en forbrugerundersøgelse af relevante danske luksusforbrugere. Disse danske forbrugere er identificeret via Index Danmark i kombination med kvalitative overvejelser. På baggrund af den teoretiske ramme og kvalitativt indsamlet data er der udviklet syv tiltag til at fremme en værdiskabende strategi på social medier. Disse tiltag anbefaler globale luksusbrands at: 1) Være til stede på Facebook og Instagram, 2) Kombinere Facebook og Instagram for at øge forbrugerenes opfattede relevans, 3) Tiltale forbrugernes indre motiverede symbolske behov, 4) Kommunikere til både potentielle og nuværende kunder, 5) Praktisere tovejs asymmetrisk kommunikation, 6) Skabe autentisk og genkendelig Page 2 of 153 content med mange forståelsesnøgler og 7) Bidrage til at mindske indsats i forbrugernes i beslutningsprocessen. Baseret på disse syv anbefalinger samt den indsamlede data konkluderes det, at globale luksus-modebrands kan styrke brand equity på Facebook og Instagram ved at styrke brandets kendskabsgrad på begge platforme, styrke funktionelle associationer på især Facebook samt sociale og emotionelle associationer på især Instagram. Content på både Facebook og Instagram skal tilfredsstille forbrugernes behov for information via autentisk og æstetisk kommunikation, samt en høj genkendelsesgrad i forhold til forbrugerens selvforståelse og hverdagsliv. Yderligere konkluderes det at globale luksus-modebrands kan styrke brand equity på social media ved at anerkende, at forbrugere på social medier skaber brand mening i en triadisk interaktion mellem brandet, den enkelte forbruger og andre aktive brugere på platformen. Overraskende konkluderes det samtidig at trods en triadisk forståelse skal luksusbrands udvikle deres kommunikationsstrategi ud fra en dyadisk tilgang, og minimere dialog og interaktion mellem brandet og dets følgere. Tilmed konkluderes det at succesen af investeringer på sociale medier bør måles ud fra kvalitativt definerede parametre. Dette skyldes indikationer på at effektiv kommunikation ikke altid resulterer i målbare forbrugerhandlinger på sociale medier. Det anerkendes og belyses at grundlaget for afhandlingens konklusioner er kvalitativt funderet i et begrænset empirisk grundlag. Denne dybtgående, men snævre, forståelse kan med fordel underbygges af videre kvalitative og kvantitative undersøgelser. Page 3 of 153 Indholdsfortegnelse Chapter 1 Introduction 1.0 Introduction 7 1.1 Research question 9 1.2 Delimitation 9 1.2.1 Limitations concerning brand equity 9 1.2.2 Limitations concerning luxury fashion brands 9 1.2.3 Limitations concerning Facebook and Instagram 10 1.2.4 Limitations concerning consumer behaviour 10 1.3 Thesis structure 11 Chapter 2 Theoretical framework 2.0 Introduction to Theoretical framework 13 2.1 Brand management 13 2.1.1 A dyadic approach to brand management 14 2.1.2 A triadic approach to brand management 17 2.1.3 Brand communications 20 2.2 Luxury management 21 2.2.1 Approach to luxury 21 2.2.2 The characteristics of luxury 21 2.2.3 Key concepts of luxury 22 2.2.4 Managing luxury brands 24 2.3 Social media 24 2.3.1 Web 2.0 25 2.3.2 Rich and relevant media management 26 2.3.3 Facebook 27 2.3.4 Instagram 28 2.3.5 Engagement motivations in online communities 29 2.4 Consumer behaviour in a social media era 30 2.4.1 The decision-making process 30 2.4.2 Exploring decision-making through Consumer Culture Theory 33 Chapter 3 Methodology 3.0 Introduction to methodology 38 3.1 Philosophy of science 38 3.1.1 Methodological position 39 3.1.2 Implications of our philosophical position 42 3.2 Research Approach 42 3.3 Methodological design 43 3.3.1 Coherence between methodological design and research question 44 3.3.2 The limited resources’ effect on methodological design and techniques 44 3.3.3 Methodological design and philosophy of science 44 3.3.4 Combined methods and triangulation 45 3.4 Research techniques 46 3.4.1 Expert interviews 47 3.4.2 A single-case study 54 Page 4 of 153 3.4.3 Index Danmark 57 3.4.4 Consumer interviews 62 Chapter 4 Analysis 4.1 The situation of global luxury brands on social media 69 4.1.1 Challenges & opportunities of social media: A luxury perspective 69 4.1.2 A luxury brand on Facebook & Instagram 77 4.1.3 Block 1 sub conclusion 87 4.2 Danish luxury consumers’ decision making process 89 4.2.1 Selecting consumer respondents 89 4.2.2 Patterns of the decision-making process 97 4.2.3 Block 2 sub conclusion 106 4.3 Expectations, relevance, and engagement motivations on social media 108 4.3.1 Expectations to luxury brands’ behaviour on social media 109 4.3.2 Relevant content and engagement motivations 111 4.3.3 Block 3 sub conclusion 120 4.4 Identifying current alignments and misalignments 123 4.4.1 Alignment concerning social media presence 123 4.4.2 Alignment concerning no dialogue 123 4.4.3 Alignment concerning visuals and communication of high quality 123 4.4.4 Alignment concerning engagement motivations on Facebook 124 4.4.5 Misalignment concerning engagement motivations on Instagram 124 4.4.6 Misalignment concerning brand-created content 124 Chapter 5 Discussion 5.0 Introduction to discussion 127 5.1 Value creating recommendations on social media 127 5.1.1 Be present on social media 128 5.1.2 Combine Facebook and Instagram to increase customer perceived relevance 129 5.1.3 Tap into intrinsically motivated hedonic needs 130 5.1.4 Communicate to potential and current consumers 132 5.1.5 Practice two-way asymmetrical communication 133 5.1.6 Create authentic and identifiable information rich content on social media 134 5.1.7 Contribute to easiness in the decision-making process 137 5.2 Brand management implications 138 5.2.1 Implications concerning brand equity creation 138 5.2.2 Combining triadic dyadic brand approaches 140 5.2.3 Measuring the social media investment 141 5.3 Empirical reflections 142 Chapter 6 Conclusion 6.0 Conclusion 144 7.0 Bibliography 147 A ppendix 153 Page 5 of 153 1 INTRODUCTION “In designing a lifestyle brand, you have to know more than just designing clothes” Tommy Hilfiger Page 6 of 153 1.0 Introduction Social media is today an important communication channel for global brands as social media is a central part of consumers’ everyday life. While consumers progressively turn to social media as an information source, they are leaving traditional media behind (Bruhn, Schoenmueller, & Schäfer, 2012). These changes in today’s media landscape manifest social media as an important communication channel that cannot be ignored. Yet, brands are challenged in figuring out how to best exploit these new touch points. According to social media expert Mads Brandt (App. B2), the abandoning of traditional media has led to a state of disorganization in favour of the new online functions (Ibid.). He highlights that social media is a factor that can determine the success of brands today: “A lot of the channels, which we previously have exploited, is now in a complete decomposed state and therefore social media will become a “make it or break it” factor for companies opportunity to communicate with their consumers”(App. B1, l. 265-266). Several brands use social media to reach, listen, and go into dialogue with local and global consumer groups with the objective of increasing consumers loyalty to the brand and, thus, to build strong brand equity (App. B2). These benefits have led several industries to incorporate social media into their brand strategies. However, one industry, in particular, is lacking behind. During 2015, it came to our attention that the luxury fashion industry is still experiencing doubts concerning their approach to social media. The world’s second-largest luxury goods conglomerate (Clark, 2014) expressed a lack of knowledge concerning strategic use of social media in the luxury fashion industry. According to luxury expert Céline Chônier, luxury fashion brands’ greatest concern today is to recognize how to manage brand equity on these platforms (App. A2). She expressed an urgent need for research concerning how to approach social media in order to strengthen brand equity without affecting the brand image negatively. While luxury fashion brands are facing challenges in their approach to and management of social media, luxury consumers’ use of social media is developing in the same speed as other consumer groups. Research indicates that global luxury consumers are heavy users of social media, and young, wealthy consumers are the most eager to participate and engage online compared to other consumer groups (Solomon, 2013). They are no longer just present on social media but increasingly demanding control and dialogue with luxury brands (Okonkwo, 2010). Page 7 of 153 “Their [luxury consumers] behaviour change is reflected in the way they interact with one another and subsequently with luxury brands both online and offline. They have become demanding of instant rewards and do not hesitate to relegate the brands unable to deliver” (Okonkwo, 2010, p. 24). Understanding these behavioural patterns and demands to luxury brands on social media sets the frame of our thesis. Theory argues that in order to build brand equity, brands must understand the consumer and deliver relevant content based on this understanding. Relevance is, thus, a prerequisite of building brand equity in today’s media landscape (App. B2) (Dinesen, 2008). This consumer understanding will be obtained using the decision-making process as a framework. Understanding where and how luxury consumers seek information and how they move through the decision-making process provide luxury fashion brands with an opportunity to tailor their social media content to these demands: “Success will come to companies that can closely track the sources of information their customers turn to and find the combination of marketing channels and tools best suited to the ways those consumers decide” (Simonson & Rosen, 2014, p. 3). The decision-making process and purchase behaviour is, however, culturally determined (Amatulli & Guido, 2011) (Kapferer & Bastien, 2012). Luxury consumers across markets differ greatly due to cultural differences that affect their perception and behaviour related to luxury brands. This stresses the importance of not forcing a general understanding of consumers across cultures. Instead, consumer research should be conducted while respecting the cultural differences and preferences. Hence, this thesis will take departure in a geographically limited consumer group – the Danish luxury consumers. Yet, luxury fashion brands are global and wide-ranging of nature. Thus, we acknowledge potential dynamics between global brands and local consumers preferences and luxury motivations. On social media, this factor is strengthened due to global platforms and communication channels that include users from all over the world following the brand. Yet, these users might not share behavioural patterns, motivations, and preferences. This supports the choice of a limited consumer group focus. Combining the decision-making process with luxury management theory, we aim at contributing to the global luxury fashion industry with a new understanding of the strategic application of the two social media platforms Facebook and Instagram. Page 8 of 153 1.1 Research question How can global luxury fashion brands apply Facebook and Instagram to build brand equity based on behavioural and expectancy patterns of Danish consumers’ decision-making process? Sub-questions 1. What are the challenges and opportunities for global luxury fashion brands in building brand equity on Facebook and Instagram, and how do they currently create brand equity on these platforms? 2. How do Danish luxury consumers use Facebook and Instagram in their decision-making process of a luxury purchase? 3. What are Danish luxury consumers’ engagement motivations and expectations to global luxury fashion brands’ content on Facebook and Instagram? 1.2 Delimitation The following section establishes this thesis’ delimitation in relation to brand equity, luxury fashion brands, Facebook and Instagram, and consumer behaviour in order to clarify the scope of our research. 1.2.1 Limitations concerning brand equity We acknowledge that brand equity is created in the mind of the consumer and influenced by brands and the social sphere that the consumer is part of. Yet, in this thesis, we focus on the concept of building brand equity through brand-created communication as this is the only type of communication that global luxury fashion brands can manage and control on social media. Further, the thesis seeks an understanding of building brand equity at a non-brand specific level. This entails that we do not consider nor attempt to explain the symbolic meaning of one brand or the brand meaning negotiation taking place in the mind of the consumers. 1.2.2 Limitations concerning luxury fashion brands We narrow down the scope of our research by dividing luxury fashion brands into segments in accordance to Corbellini & Saviolo (2010). The luxury industry can be divided into three segments, as illustrated in figure 1. At the top of the luxury pyramid is the ‘supreme luxury’ segment, formed by unique, ultra-expensive, exclusive pieces. Positioned at the next level is the ‘lifestyle luxury’ segment, constituted of limited, high quality pieces accessible to only a selective number of consumers due to its fairly expensive prices. At the bottom of the pyramid is the ‘accessible luxury’ segment, also known as the ‘accessible super premium’ segment, which is made of good quality products offered at accessible prices (Corbellini & Saviolo, 2010) (Csaba, 2008). In this thesis, we base our research on one global luxury fashion brand within the ‘lifestyle luxury’ segment that is designing handbags for women. Luxury handbags have gained a prominent position Page 9 of 153 in the luxury industry and in the mind of consumers due to their current prestigious status in society (Thomas, 2008). This makes luxury handbags an interesting subject of research. Global luxury fashion brands are hereinafter referred to as luxury brands. Supreme luxury Lifestyle luxury Accessible luxury Figure 1. The luxury pyramid (Corbellini & Saviolo, 2010, p. 113) 1.2.3 Limitations concerning Facebook and Instagram Facebook and Instagram are so called online social media platforms. A great number of online social media platforms exist today, and the development of both existing and new ones are constantly happening. In our thesis, social media is defined as: “communication systems that allow their social actors to communicate along dyadic ties” (Peters, Chen, Kaplan, Ognibeni, & Pauwels, 2013, p. 282). This definition is based on a two-sided construction. Based on Peters et al.’s (2013) approach, we understand social media as a mix of two areas of research: communication science and sociology. The communication research contributes with the understanding of social media as a channel for storing and delivering information. Drawing in the sociological understanding, social media is a social network where social actors are creating social structures with dyadic ties – it could be individual, groups or organizations. According to Peters et al. (2013), six types of social media exist1. Yet, when using the term ‘social media’ in this thesis, the reference is limited to the two social networks Facebook and Instagram. Facebook and Instagram are two of the largest social networks in Denmark today (DR Medieforskning, 2015), which underlines the thesis’ focus on these selected platforms and explains the choice of Facebook and Instagram as the field of research. 1.2.4 Limitations concerning consumer behaviour Concerning the consumers’ decision-making process, we focus on the decisions made by Danish luxury consumers during a luxury fashion handbag purchase. As the intention of the thesis is to understand Danish luxury consumers’ behaviour on social media, the ‘purchase’ phase in the decision-making process will not 1 Six different groups of social media: (1) collective, (2) blogs and microblogs, (3) content communities, (4) social networks, (5) massively multi-player online role-playing games, so-called MMORPGs, and (6) social virtual worlds (Peters, Chen, Kaplan, Ognibeni, & Pauwels, 2013). Page 10 of 153