Lovers Of Luxury II

Lovers of Luxury II Understanding Regional Differences in Online Consumption of Luxury Brands

THE NUMBERS 60% use the internet each month to find information about luxury goods ARE GROWING 54% would like to see more advertising for luxury goods online FOR LUXURY BRANDS 51% use the internet each month to communicate with friends and family about luxury brands advertising.microsoft.com

Digital Media & Luxury Brands Objectives of Study Digital advertising has a role to play Is it appropriate for luxury brands to use digital at every stage of engagement. channels in marketing communications? Microsoft has developed a luxury brand • Consideration: The act of researching, • What are the motivations for purchasing engagement model which identifies 6 choosing and ‘trying on’ a specific luxury goods? distinct engagement points consumers product. • How do Luxury Lovers engage with have with a luxury brand, how they interact • Purchase: Offline or online purchasing luxury brands? with these points and what drives these consumers to the point of purchase. It is the • Ownership: Membership of the brand • How open are they to digital advertising? convergence of these engagements through club — purchase represents a higher level • How should digital marketing be used in multiple channels that build stronger brands of relationship with the brand. luxury marketing? and drives consumer brand advocacy. The model describes the six fundamental ways in which consumers engage with luxury brands: Awareness • Awareness: Consumers actively seek out information about luxury brands. p nce Exc hi lge Ad ers • Admiration: Luxury goods represent an l mir Own us u Ind ivit idealistic set of aesthetic and qualitative ation y standards, and luxury brand advertising represents a glimpse into a more A luxury seductive, exciting world. brand n Purc • Exploration: After the initial allure, atio Sta consumers seek to explore, understand tu ali ty s ha Qu lor and authenticate the brand. se xp E Con sideration We can map digital advertising channels to the engagement model allows us to understand the different roles that each can play in a campaign Display Ads Search Email Instant Social Custom Desktop Messaging Networks Solutions Awareness Targeting first; Sponsored links: B2C: Newsletters C2C: Sharing, C2C: Sharing, Microsite(s) Gadgets Productivity then environment text + video C2C: Sharing, WOM BOTs WOM Software* WOM RSS feeds: news, events, launches, sales, etc. Admiration Video Sponsored links: C2C: Sharing C2C: sponsored Microsite(s) Screensavers/ video Sharing Ads destinations Wallpaper Exploration Link to content, Sponsored links: B2C: Newsletters C2C: Sharing, sponsored Microsite(s) Gadgets e.g. Fashion Week text + video C2C: Sharing, WOM BOTs destinations WOM Consideration Sponsored links B2C: Newsletters BOTs C2C: C2C: Sharing, Microsite(s) C2C: Sharing, WOM Sharing, WOM WOM My My Gift Wish List My Gift Wish List Gift Wish List Sponsored links Purchase Downloadable/ B2C: Exclusive UGC UGC Personalized Gadgets Ownership Shareable newsletters UGC Content Screensavers/ Wallpaper

A Passion for Luxury Our research confirms a phenomenal global appetite for ASIA EUROPE luxury goods. Total spend last year on luxury goods Total spend last year on luxury goods We estimate around US$148 billion was US$134 Billion US$14 Billion spent by online Luxury Lovers last year Total luxury goods purchased last year Total luxury goods purchased last year across our Asian and European countries, of which around a quarter was spent online. 1.9 Billion 820 Million It’s important to note that Luxury Lovers also % of goods bought like to share the love. for self as opposed to gifting Around one third of purchases across categories are bought as gifts. Designer clothing Designer fragrances Fine jewellery and accesories and cosmetics and watches ASIA 72% 66% 65% EUROPE 67% 58% 57% The European market comprises of a more mature market, whereas the Asian market is dictated by a younger luxury consumers. While luxury lovers in Europe are evenly split in gender, Asians are skewed more male. These differences do not mirror their respective populations as a whole. Understanding the differences between regions and within countries is key to targeting and planning for luxury consumers. Note that India, China and Russia are characterized by much younger Lovers of Luxury – something which defines their attitudes towards luxury consumption and use of digital channels 26% Europe 23% Female Male Asia 18% 16% 16% 18% 56% 16% 50% 50% 14% 44% 13% 8% 6% 6% 7% 6% 4% 3% 18-25 26-30 31-35 36-40 41-45 46-50 51-55 55+ Europe Asia advertising.microsoft.com

The Message of Luxury Across all regions, we uncovered a common set of core purchase motivations. INDULGENCE o Treating oneself to something ‘special’ o A sensory experience o Promotes sense of wellbeing o Premium to the act of indulging oneself EXCLUSIVITY o Being part of an exclusive club o Members define themselves through understatement o Members take pride in being ‘in the know’ o Members signal to and identify each other through the brands they display STATUS o Communicating status to those around us o A personal affirmation of one’s own progress through life QUALITY o Perceived excellence of design, materials, manufacturing and craftsmanship.

The Motivations of Luxury Indulgence, Exclusivity, Status and Quality These four motivations map to either rational or emotional perceived luxury product benefits RATIONAL EMOTIONAL o Heritage, expertise, o Quality of o Success o Desirability reputation manufacturing o Confidence o Indulgence o Quality of design o Quality of o Wealth o Pleasure o Quality of materials experience/ o Elitism o Reward service Luxury goods purchase in Asia is motivated by the desire to own high-end quality products while exclusivity and indulgence drive luxury purchases in Europe. While each motivation plays a role in the decision to purchase luxury goods, our analysis suggests that Status is the most variable motivator when comparing individuals In Europe, the drivers of luxury consumption are exclusivity and indulgence, whereas in Asia, the primary driver is status Index scores on each factor (arrows show direction of mean relative to average) Indulgence Exclusivity Status Quality ASIA (-0.1) (0) (0.6) (0.2) (-0.3) EUROPE (0.1) (0.2) (0) And differences even appear between age groups within regions. ASIA 0.02 -0.29 -0.74 -0.04 -0.02 0.06 0.67 0.48 0.55 0.19 0.20 0.18 0.06 0.08 -0.13 -0.05 -0.02 0.03 EUROPE -0.09 -0.50 -0.80 0.17 0.19 0.05 18-35 36-54 55+ advertising.microsoft.com

Mapping countries according to their affinity with different purchase motivations provides insights for campaign planning. We found that markets can differ by key motivators which is important information for advertising strategists. Germany, Denmark, Italy Spain are markets which are exclusivity-driven whereas Japan, China are status-driven The size of the bubbles indicate the online population. Axes show the extent to which each country over/under indexes on each motivator. Over-index = right and top, under-index = left and down. Exclusivity Exclusivity Exclusivity Driven +1.0 + Status Germany Singapore Denmark Spain Russia Taiwan India China Sweden Italy Finland -1.5 Status Status South Korea +1.5 Switzerland Hong Kong Netherlands Belgium Japan Status Exclusivity Driven Norway -1.0 Belgium, Netherlands and Sweden emerge as markets most driven by Indulgence as a motivator. Indulgence Indulgence Indulgence Driven +1.0 + Status Sweden Belgium China Netherlands Taiwan Germany Spain Norway Switzerland Singapore -1.5 Status Status +1.5 Denmark Italy Finland India South Korea Russia Hong Kong Japan Status -1.0 Driven Indulgence

Luxury and Technology Luxury Lovers are increasingly dependent on digital media and technology Our survey data confirm that Luxury Lovers are heavy users of online services and applications. Used in past six months Online Activity ASIA EUROPE Using Email 80% 84% Online Banking 73% 70% Online Shopping 70% 66% Business Purposes 59% 63% Downloading Music 56% 44% Instant Messaging 55% 46% Watching user generated video clips 54% 45% Going on social networking sites 48% 36% Watching TV 42% 29% advertising.microsoft.com

Luxury Consumers and the Internet Luxury consumers are already using the internet to both engage with and talk about luxury brands 60% Researching or 30% Receiving 51% Communicating sourcing products communications from with others about or brands brands or retailers brands or products • Finding out where to buy • Receiving email newsletters from • Forwarding emails or links to friends – to share a desired product prestige retailers or recommend products • Establishing a brand’s heritage and • Receiving email newsletters or event • Sending IM to friends about luxury products ‘authenticity’ via its website invitations from luxury brands • Sending SMS or MMS messages from stores to • Browsing luxury goods online include friends in purchasing process There is high acceptance of luxury In Europe, the Internet has an important display advertising across many role to play in luxury brand inspiration. online environments (even more so In Asia, the Internet rates highly as a key for Asian Luxury Lovers) source of inspiration for luxury brands. % of those who would be happy to see online ads Thinking about luxury items such as fashion, fine jewellery, on each of the following watches, cosmetics and designer fragrances, which of the following give you inspiration and ideas on what to buy? 73% Visiting the 63% Fashion Websites 67% actual stores 79% Lifestyle, Culture & 67% 65% Magazines Entertainment Websites 60% 60% Travel Websites 42% The Internet 63% 33% 50% Upscale Community 53% Catalog/brochure 50% Websites 31% through mail 45% Major web portals, e.g: 48% Advertising 63% msn.com 24% on TV 43% Personal Finance 30% Advice from 46% Websites 21% friends & family 41% News websites 30% Billboards/posters 41% 20% 34% Asia Asia Anywhere online 35% Seeing what people 35% 19% Europe wearing on the street. 34% Europe TV Shows 51% 29%

Luxury Online Advertising Over half of Luxury Lovers would like to see more luxury advertising online I would like to see more advertising of luxury goods on the Internet % of global sample agreeing with statement Agree 30% Among the ”Agree” and “Completely Agree” Groups: 24% 25% Completely Agree Region: ASIA EUROPE Age: 16-34 34-54 55+ 13% 8% 64% 31% 59% 47% 34% Completely Disagree Internet is a great way to stay up to date with luxury brands Agree 34% 34% Among the ”Agree” and “Completely Agree” Groups: Completely Agree Region: ASIA EUROPE Age: 16-34 34-54 55+ 25% 13% 4% 72% 57% 72% 62% 52% Completely Disagree Perhaps unsurprisingly, Luxury Lovers want their favourite luxury brands to adorn their PC desktop Mean appeal scores of ad formats (1-5, where 5=very appealing) Desktop Wallpapers 4 The overall order of preferred 3.6 formats was the same when Desktop Gadgets* 3.7 comparing key demographics. 3.2 On Cellphones / Blackberries 3.6 Note the higher preference 2.9 for ads on cell phones and Banner ads on websites 3.6 blackberries in Asia. 3.2 Desktop Screensavers 3.6 Base: 3.1 Total quantitative sample (n=3,603) Email Newsletters 3.4 *Full text is “Desktop gadgets that 2.9 keep you up to date with the latest luxury information” IM Ad banner 3.2 2.5 In Game Advertisement 3.2 2.8 Asia Search Engine (Ad Words) 3 Europe 2.7 advertising.microsoft.com

Microsoft Advertising channels reach Luxury Lovers of all demographics % who use at least once per month REGION AGE GENDER Asia Europe 16-34 34-54 55+ Male Female Windows Live Hotmail 74% 44% 72% 55% 43% 65% 64% Windows Live Messenger 72% 47% 72% 52% 43% 64% 63% Windows Live Search 67% 29% 61% 47% 30% 57% 53% Facebook 58% 31% 60% 36% 15% 51% 48% Windows Live Spaces 58% N/A** 61% 43% 29% 56% 52% Windows Live Search Maps 60% 22% 54% 32% 17% 48% 41% XBOX Live 1% 17% 6% 6% 3% 5% 6% MSN Portal 72% 38% 67% 53% 48% 63% 59% * Base Total Sample (n=3,603) ** This question was not asked in Europe

Appendix | Methodology All research was conducted by London-based Essential Research on Microsoft’s behalf. Phase 1: Qualitative Research A multi-stage approach across the US, UK, France and Japan STEP 1 Media and technology diary STEP 2 Individual depth interviews STEP 3 Friendship pair interviews Phase 2: Quantitative Research A 15-minute online survey amongst 3,603 “Luxury Lovers” followed by a wave of follow-up web chats conducted via Windows Live Messenger ASIAN SAMPLES South Korea China Japan India Hong Kong Singapore Taiwan n:253 n:250 n:252 n:250 n:253 n:253 n:251 EUROPEAN SAMPLES Italy Germany Spain Sweden Switzerland Belgium n:255 n:254 n:255 n:58* n:255 n:153 Netherlands Denmark Norway Russia Finland n:256 n:47* n:88* n:251 n:57* *Note that Denmark, Norway, Finland, and Sweden were combined (weighted by population) and presented as Scandinavia advertising.microsoft.com

Appendix | Internet is a critical source of information amongst luxury goods consumers You mentioned that you use the internet to find out about luxury items. Approximately how often do you use the internet to find out about luxury goods? Proportion of our sample who use the internet at least monthly to find out about luxury products Asia 69% Europe 52% Proportion of Asian countries who use the internet at least monthly to find out about luxury products online Asia South Korea China Japan 69% 65% 78% 53% India Hong Kong Singapore Taiwan 38% 63% 45% 37% Proportion of European countries who use the internet at least monthly to find out about luxury products online Europe Italy Germany Spain Sweden Denmark 52% 49% 50% 49% 53% 61% Norway Russia Switzerland Belgium Netherlands Finland 38% 63% 45% 37% 44% 66%

For more information contact: Beth Uyenco, bethu@microsoft.com Global Research Director Nancy Ko, nancyko@microsoft.com Research Manager for Greater Asia/Pacific Simon Falconer, sifalcon@microsoft.com Consumer & Emerging Media Insight Manager for EMEA advertising.microsoft.com

Call on Microsoft Advertising for a customized advertising strategy that targets your audience through a range of digital experiences. We deliver the innovation and expertise to help you reach millions of people with just one platform.

Lovers Of Luxury II

by Akvile Pareigyte on May 13, 2010

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Lovers Of Luxury II — Document Transcript

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