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To what extent do intergenerational influences affect luxury brand loyalty?

Holly Brice, Part 1 BSc CBM Applied Project Report, April 2013 2,776 words

i. Contents Abstract 1. 2. 3. 4. 5. 6. Introduction Why intergenerational influence is important How intergenerational influence can be used Luxury brand loyalty and the economy Luxury brand loyalty and peer and social influences Conclusions 3 4 5 6 7 8 9 11 12

References Appendices

ii. Abstract A in depth look in to what extent do intergenerational influences affect luxury brand loyalty by assessing how successful it has been in attaining luxury brand loyalty compared to other factors that may influence the gain of brand loyalty such as the economic climate and peer and societal pressures. This report will review existing literature on the topic (See Appendix A) and analyse how far intergenerational factors influence brand loyalty in particular with luxury goods. The analysis showed that intergenerational factors were mostly beneficial for businesses and in the future intergenerational influence is likely to grow but other contributing factors will also increase luxury brand loyalty. However more research should be undertaken into how far luxury brand loyalty is being affected by intergenerational influences and how far it could be influencing in the future. Holly Brice, BSc CBM, 26/04/2013

1. Introduction 1.1 Background and Context Brand loyalty can be noted as a highly recognised feature of marketing as it can mean the difference between a flourishing firm and administration. Features of repeat purchases and avoidance of competition can allow the firm to focus on driving in new customers to increase sales meaning less waste of sparse resources. Intergenerational influence is a fairly new way of marketing by which there are no costs. Two key terms have been coined to mean the successful or failed transference of brand loyalty between generations. Bridging is the strengthening bond of respect to a member of an older generation and product identification with this individual (Olsen, 1993) and the recognition of the useful aspects of the product such as finding it reliable. Olsen (1993) also explained fencing which is the antithesis and means the failed transference through asserting independence through rejection of a brand. This can occur for a number of reasons such as: a bad relationship with parents or a divorce in the above generation; the lower generation finding a more suitable brand for them. In Olsen (1993) a participant expressed that her mother mandated all products that were to be used within the household and if any other brand were brought in she would pass derogatory remarks about the product an d this affected her to an extent which she now uses none of her mothers favourite brands but often the competing brand. However intergenerational influence is not the only determining factor in brand loyalty. The economic climate itself is a clear indication as to why brand loyalty may be harder to maintain as many shoppers are influenced by a cheaper price or better value for money than the brand they were brought up on. As this report is focusing on luxury brand loyalty the economy has an even larger impact. Many shoppers may refuse to even buy luxury products or spend a very little percentage of their disposable income in products that are unnecessary. However another influence, closely related to intergenerational influence is peer and social pressure. This may come in the form of pressure to conform to societal norms and consume goods that society deems as acceptable rather than cheaper or inferior goods. One example of this could be fair-trade goods. Fair-trade goods are luxury in terms of price and in society is the more responsible item to be buying to cheap supermarket brands because it does not take advantage of their workers but instead pays them fairly. Society may pressure consumers into changing their behaviour to buying these products rather than a cheap supermarket brand that may be more in their prince range.

1.2 Objectives and Aims This report intends to critically analyse how intergenerational factors can affect luxury brand loyalty and how other factors could also be influencing luxury brand loyalty. I endeavour to

look into the relationship between these factors and interpret whether intergenerational influence may or may not have the most substantial influence on luxury brand loyalty.

In order to achieve this this project will consider: Assess how far intergenerational factors have resulted in successful brand loyalty compared to other factors Calculate whether luxury brand loyalty is likely to be more influenced by intergenerational factors in the future and how this will affect other factors Identify how other factors may influence brand loyalty more than intergenerational influence

1.3 Guide to the Reader This report is structured into five more sections; two of which focus on intergenerational influence and a further two which look more into the other major factors concerning luxury brand loyalty and another that looks at the end conclusion of this data. The sections talk in further detail about how they affect luxury brand loyalty and how businesses manipulate them to gain more prospective customers. -Section 2 covers how intergenerational influence may not be well known but how it can be important in securing potential customers and keeping them and discussing the antithesis that it can drive customers to competitors under the right conditions as well; -Section 3 discusses how businesses may manoeuvre intergenerational influence in a way that benefits the business and drives up sales through targeting a family atmosphere in advertisements where the product does not necessarily target families; -Section 4 analyses another factor in the gain of luxury brand loyalty and how hard it can be. The Economy will be criticised as both an influence and a deterrence to brand loyalty and in particular luxury products; -Section 5 analyses how peer and social pressure influences are also to be accounted for purchases and looks in-depth at how far repeat purchases of luxury goods can be called brand loyalty; -Section 6 presents the conclusions of previous data and arguments offered.

2. Why intergenerational factors are important 2.1 What is intergenerational influence?

Intergenerational influence is the passing down of the torch and the skills, attitudes and behaviours that are transferred intergenerationally and the processes by which this happens between two or more generations (Moschis, 1985). Intergenerational influence can affect the individuals norms, how they perceive the world for instance may be different from another individual because of the way they have been brought up by their parent or guardian. Their values may also be impacted because of their upbringing as well (Heckler, Childers and Arunachalam, 1989). A motive for this to occur is the existence of a product within the household consistently for long periods of time so when the individual is away from this atmosphere they might bring the familiarity of product with them (through still buying the brand). Many individuals continue to use the same product because they are to an extent afraid of the unknown of buying another product that may not live up to their standards or quality or value or the transferred good.

2.2 How do intergenerational factors affect luxury brand loyalty? If intergenerational influence can occur then businesses are going to find they have a much larger customer base and can reach more people without having to raise costs by advertising. Depending on the income of the family depends on how far luxury brand loyalty can be passed down. Usually the higher the familys disposable income, the higher the amount of luxury brand goods consumed within the family. However a poorer family may be able to buy luxuries on occasions, and if the luxury item/s they buy are the same then this could count as being loyal to that brand, nevertheless it may be more strenuous to transfer this brand loyalty to the next generation if bought less frequently. Childers and Rao (1992) suggest that luxuries that are consumed within the premises on home mainly are likely to have high familial influence, as peers and social groups are unlikely to influence these decisions on purchases. The familial influence here is more indirect however as little to no communication is likely to be made about these goods. Olsen (1993) agrees with this assertion as a participant of a case study revealed the males are extremely brand loyal with price having no effect on their decisions seconding the idea that intergenerational influence could be stronger than price. 3. How intergenerational influence can be used 3.1 How businesses may inadvertently depend upon intergenerational influence This applies only to businesses that have been around long enough for two generations or more; therefore no new businesses can be depending on intergenerational influence for sales, however they may still depend upon familial influence as it does not require for the

business to be more mature but rather known by an older generation that can recommend to a younger generation. For the businesses that do apply, some may not even know that their sales could be depending on the influence of generations above to pass down loyalty to their brand. This could be because intergenerational influence can have a large effect and businesses cannot keep track of whether families are all keeping the same products within their households. 3.2 How businesses can attempt to encourage intergenerational influence The probability of converting a non-user to your brand is about three in 1,000 (Centennial, 1989) therefore it would be more efficient for a business to keep an existing customer than trying to gain another. By keeping a current customer, they may be benefitting from intergenerational influence in the long term and therefore creating a new customer without the cost of attracting the new customer. By focussing less on price and how cheap a product is but more on assurance of good quality and reliability businesses may encourage intergenerational influence. Price may occasionally work for a once off purchase but if quality cannot match their standards then repeat purchases and eventual brand loyalty is unlikely to happen. In a case study by Olsen (1993) one participant pointed out My mother still buys every brand that her mother did highlighting that intergenerational influence can be quite strong at certain times, but this not account for exaggeration so this evidence must be taken lightly. However she continues to say she is scared to try anything else, for it will not meet her standards showing that being fearful of unknown products not up to standards means she is willing to pay for a brand that is known and reliable. Another way to attempt to increase intergenerational linkage is by advertising the product as one for the family. For example Recent Clinical Studies Prove Your Grandmother Was Right (Vicks VapoRub) as Olsen (1993) pointed out that this could show that brands should be kept within the family. As Childers and Rao (1992) pointed out, if the product is consumed privately, and most likely at home, then there is more of a familial influence to continue buying this product and even take a loyalty to this brand. Therefore if brands that are not necessarily always used at home are advertised as being a product for home and enforce this to an extent that customers use it in private vicinities then there could be familial influence. However if it publicly consumed then there is less chance of the influence as Childers and Rao (1992) state that this influence is due to observance of consumption or interaction with this occurrence, and if this does not happen then a transference of a brand loyalty is unlikely. 4. Luxury brand loyalty and the economy 4.1 At the current economic climate

In most cases the economy at the moment can only encourage consumers to choose the cheapest options or options with the most value for money. It is likely to encourage anything other than a loyalty to a brand in most circumstances. It is logical to save disposable income that is reducing in purchasing power every day by choosing cheaper options rather than spend more on a brand that you know. But on the other hand, trying out other options that are not value for money is to an extent wasting money rather than sticking to a brand they know will work. Moore and Lutz (1988) say that shoppers use decision heuristics such as choice rules that include depending on well-known brand names that backs up this point that consumers tend to stick to brands they know. 4.2 In a different economic climate If the economy were in a boom then luxury brand loyalties would most likely be more common. People would have more disposable income to spend on goods and prices would be lowered, meaning people have more money to spend on luxuries and are unlikely to be saving. Sales on luxury products rise as incomes are high and with this more loyalty to luxury brands. In an upturn in the economy the sales in luxuries are likely to grow because incomes are gradually increasing and many may find they have more disposable income to spend or save and those who spend are likely to buy more luxurious goods. If the upturn continues and they find that they are satisfied with the product they may repeat purchases with the brand and become loyal.

5. Luxury brand loyalty and peer and social influences 5.1 Peer influences Peers could be anything from close friends of the individual to colleagues in a work environment or other students in a school environment. They could be influencing the individual by non-verbal communication whereby the individual observes or interacts with the brands and products of their peers and are influenced in this way. They could also be influenced by verbal communication of the peer discussing the product or brand and influencing the individual to buy it. Peers can be part of any social class but have a more direct influence on the individual than social influence because they are individuals compared to a norm in society to buy particular luxury brands or products. As expressed earlier, Childers and Rao (1992) stated that privately consumed luxuries were influenced by family and by extension can be affected by intergenerational influence. They also looked into another type of luxury: a publicly consumed luxury. A publicly consumed luxury is one which is rather exclusive to the individual and not commonly owned. This means that the decisions to buy these goods are susceptible to peer influence. They

continue further by saying that the brand is also directly observable to peers that this will also be influenced. 5.2 Social influences The extent to which society norms influence individual depends upon the society class in which they reside. If they reside in the working class then the amount of luxuries bought are likely to be low and this can be generalised to an extent to the whole of the working class because the disposable income for luxuries are lower than the middle and upper classes. Moschis and Churchill (1978) support this when they concluded that adolescents in lower and working class families have fewer opportunities to partake in consumer decisions than middle and upper class adolescents can. This highlights that lower class children have less opportunity to consume luxury goods and if continuing in that social class until adulthood may continue this consumer behaviour. The middle class is more likely to be pressuring of consuming luxuries because they have more disposable income to spend on these kinds of items. Individuals within the middle class are also more likely to accept this pressure to buy these goods because they have the funds to do so rather than the working class who have fewer funds to do so. The most susceptible individuals, however, are those moving between the classes. If moving upwards then many may be more susceptible to paying for these luxury items to fit in. They may be pressured to buy certain products that they usually would not so that they can feel part of the society norms. There is the question as to whether when the individual is an adult whether it would stick to familial influence or the status that they hold. Heckler, Childers and Arunachalam (1989) assert that as an adult becomes more secure financially or even exceeds that of their parents, their consumer choices would change from their parents and towards one of their status. This links to familial influences and highlights that in this instance the status of the individual is more important than intergenerational influence. 6. Conclusions Intergenerational influence has proved to be extremely helpful not only for businesses to reduce their costs but also customers find that by sticking to a brand they have known for a long period of time they will not be disappointed compared to trying a new product that does not work out for them. As more businesses recognise intergenerational influence they will adapt their advertising to try and suggest that their brand is one that works for generations. Society may say however that if the status increases within the family they should uphold their status by changing buying habits which may not include certain products or brands. An argument can be made that in this economy one would look to a cheap product rather than a well-known brand but most evidence states otherwise. In conclusion, intergenerational influence has a large effect on sales for a business through brand loyalty, and many consumers still continue to stay by their brands in a recession. The only factor against intergenerational influence is society pressure to conform to an

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unwanted brand loyalty. Therefore to an extent intergenerational influence affects luxury brand loyalty more than the economy; peer and social pressure, and is likely to increase in the future. More research should be made into how businesses could increase luxury brand loyalty and how far it is already being affected as no current statistics are available.

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References Centennial Survey (1989) Brand Loyalty is Rarely Blind Loyalty: Use in Coupons, Choices Blamed for 80s Erosion, The American Way of Buying/Series, Wall Street Journal, (October 19) Childers, T.L. and A.R. Rao (1992), The Influence of Familial and Peer-based Reference Groups on Consumer Decisions, Journal of Consumer Research Heckler, S.E., T.L. Childers and R. Arunchalam (1989), Intergenerational Influences in Adult Buying Behaviours: An Examination of Moderating factors, in Advances in Consumer Research, Vol. 16 Moore, E.S. and R.J. Lutz (1988), Intergenerational Influences in the Formation of Consumer Attitudes and Beliefs About the Marketplace: Mothers and Daughters In Advances in Consumer Research, Vol.15 Moschis, G.P. and G.A. Churchill, Jr. (1978), Consumer Socialization: A Theoretical and Empirical Analysis, Journal of Marketing Research, Vol. 15, November Moschis, G.P. (1985), The Role of Family Communication in Consumer Socialization of Children and Adolescents, Journal of Consumer Research Olsen, B. (1993), Brand Loyalty and Lineage: Exploring New Dimensions For Research, in Advances in Consumer Research, Vol. 20

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Appendix A-Literature Searching Methods Google Scholar was used using words such as intergenerational influence; intergenerational transmission or familial influence usually combined with buying behaviours; brand loyalty or luxury items with some variations there upon. This would look into articles useful to the report and find some varied articles with both quantitative and qualitative research conducted Business Source Complete through Reading online databases was also used using keywords above as well as roles of peers society pressure and brand preferences to find sources for different factors that contribute to luxury brand loyalty. Another source used is EconLit where the keywords above were used again but this time found articles were more related to the economy with more quantitative data to back up points made