At the end of the 1970s, the luxury industry was far from what it is recognised as today. Over a century ago, the majority of luxury goods brands were established as small, family-run businesses that created exquisitely, hand-crafted products for the elite (Thomas, 2008). It is only in recent decades that great structural changes have been made, specifically as a result of the change of focus from independent, artisan stores to large, luxury conglomerates such as Louis Vuitton Moët Hennessey (LVMH), Kering and Richemont.
At the forefront of this shift was French businessman, Bernard Arnault. After taking control of the textile group Boussac in 1984, Arnault saw potential in the luxury market. His aim was to merge with LVMH, which had generated around €2.8 billion worth of sales and achieved a net profit of approximately €480 million at the time (Thomas, 2008). By 1990, he had been successful in this pursuit and subsequently, initiated the construction of what is now the most powerful, luxury conglomerate in the world (Business of Fashion, 2017). Shortly after, Richemont and Pinault-Printemps-Redoute (PPR, now known as Kering) would also follow Arnault’s lead.
With the emergence of these new luxury groups, came completely new business strategies. Previously, marketing strategies had simply not existed within the luxury industry and it is with their implementation that the value of the conglomerates has dramatically increased. Today, the turnover for the entire luxury industry has reached an outstanding €1.08 trillion (Bain & Company, 2016), and Figure 1 shows that €249 billion of this is made up by the personal luxury goods market alone.
Figure 1. The Exponential Growth of the Personal Luxury Goods Market from 1994 to 2016
(Bain & Company, 2016)
However, it is significant to discuss what has been deemed as a detrimental consequence of this success. It has been argued that ‘the luxury market has changed, almost beyond recognition’ (Coste-Manière, et al., 2012, p.5), and that its attention has been diverted from craftsmanship to profit as a result (Contant, 2017a). This suggests that -while it is undoubtable that the introduction of marketing strategies has created an exponential growth within the luxury market- it is important to analyse and assess the ways in which brands are balancing profit with the maintenance of essential luxury characteristics.
The ultimate goal of any luxury brand is a balance of high financial and emotional value. In order to achieve this, -and thus, a strong brand equity- certain marketing strategies must be implemented. An understanding of the most influential strategies is pivotal, and therefore components of the marketing mix must first be identified and examined. Traditionally, these components have been referred to as the 4P’s, but more recently have increased to the 7P’s: Product, Place, Price, Promotion, People, Physical Environment and Process (Jackson and Shaw, 2001). Therefore, in order to evaluate and conclude the extent of which marketing communication strategies have influenced the strength of brand equity, the most relevant components to the personal luxury goods market must be analysed and compared in depth: Promotion, People, Place and Product.