Luxury Brands in Virtual Worlds


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Luxury Brands in Virtual Worlds

  1. 1. Luxury Brands and Marketing in Virtual Worlds A KZero Worldswide report Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 1
  2. 2. V irtual worlds are becoming the latest marketing platform for luxury brand owners to create engaging and dynamic relationships with affluent target markets. This KZero case study explains the rationale for luxury brands to enter virtual worlds, examples of brand activity already taking place, profile analysis of the residents and strategic options for marketers. Brand and marketing activities in these digital interactive environments are also rationalised and assessed, along with strategies for companies looking to enter this space. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 2
  3. 3. What is a virtual world? However, as the chart below left shows, other regions and in particular Europe, have embraced Second Life. The World Wide Web as we know it today consists of In late 2006, Second Life resident numbers broke static 2D pages. You visit a website and read/watch through the 1m mark, helped by significant media the information or media presented on it. Virtual coverage. During 2007, resident numbers grew by 1m worlds (metaverses) are different. per month and now (Jul 2009) the total number of They are digital 3D environments accessed in real- registered accounts is over 19m. time that allow people to explore, examine and However, even greater growth has been observed in interact with the objects created within the world and virtual worlds catered towards younger audiences. importantly they allow people to interact together in a Stardoll for example, has over 34m accounts, Barbie shared collaborative space regardless of their Girls over 10m and IMVU over 39m. Appendix one geographical location. shows the KZero universe graph, an illustration of the Second Life was the first glimpse into the future of the size and range of virtual worlds available. Internet, a future of ‘Places, not Pages’. However, other Using Second Life as an example, as explained in the virtual worlds such as There, Kaneva, Stardoll and following sections, the unique characteristics of a many others are now available for marketers in this typical resident has expedited the take-up, and the emerging space. range of different countries represented. Why are virtual worlds growing? Who is a typical resident? The most popular commercial metaverse to date, Second Life, is a global application, meaning that Second Life is not a gaming application. There are no anyone can become a resident. Initially, North America scores, no ‘lives’ to protect, no objectives and no end- drove take-up due largely to the fact that the result. company behind Second Life, Linden Lab is based in Comparison has been drawn to World of Warcraft, an San Francisco. extremely popular MMOG (massive multiplayer online game) but the only real similarity is the fact that they are both virtual worlds. Rest of World 23% Importantly, whereas the average age of a Warcraft US player is 17, for Second Life, the average age is 32. It is 37% this fact which stimulated the interest in major brands to consider entering Second Life. Below (next page) is the age range spread for residents. Europe 37% Canada 3% Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 3
  4. 4. The graph below shows the regional breakdown of fashion-themed world Stardoll. Rest of World 16% US 37% Also of note and further interest to brand owners is the fact that females account for 45% of users. A Europe surprising, yet valuable piece of information. So, a 43% combination of the average age and gender ratio has Canada 4% made brands realise that there are benefits to be reaped by developing metaverse marketing strategies. KZero has in-depth data and research available for a wide selection of virtual worlds and is best-placed Further analysis of the demographic profile of to make media planning and virtual world selection residents reveals that these people reside heavily decisions for marketers across the world. within the Innovator and Early Adopter groups. It will not be long before virtual world marketing Pre-December 2006, Innovators were the main types initiatives are promoted in TV, print and other inside Second Life, but, as explained by the Rogers mediums as promotion and then cross-promotion Technology Adoption Curve, Innovators act as a initiatives are used to attract as many visitors as catalyst for Early Adopters. Whereas Innovators are possible. very keen to trial new technologies, they have local social networks. There are even newspapers and magazines available now purely for virtual news stories and worlds. One The media landscape example is the Avastar - a metaverse red-top newspaper available via website and in Second Life. Second Life aside, marketers now have a wide range The newspaper (published two to three times a week) of options available to them. And, importantly, has stories about the latest virtual developments and traditional media planning techniques can now be just like real media, offers advertising space. used to select the most appropriate virtual world for the marketing objectives. Different worlds have widely different resident bases from a geographical perspective as well as different age ranges - as demonstrated by appendix one. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 4
  5. 5. Luxury brands in virtual worlds? However, referring back to the definition of luxury brands being priced comparatively higher than Firstly, let’s start with a definition of a luxury brand. A normal goods, this presents an interesting issue in luxury brand is ‘a product, service or good that is virtual worlds. priced higher than similar items in the same category typically due to a higher comparative quality’. The price of an average ‘item’ in Second Life is approx. $1 (USD) - in other words, low. And, many items Product categories which are more likely to contain deemed as being in the luxury category are within this luxury brands include clothing and accessories, price range. Couple to this the fact that in many watches and jewelry, automobiles and electronic instances, luxury is the norm in virtual worlds because products. of these pricing levels. In the context of virtual worlds, the clothing and So, an opportunity clearly exists to create uber-luxury accessories category contains the widest scope for real virtual goods by increasing the price of these items to world luxury brand owners. This is a factor of several position them as perceived luxury items. related variables. So what can brand owners of luxury goods do inside There is an extremely high demand for clothing and virtual worlds? These options can be broadly split into accessories in virtual worlds. This is because when two categories: brands with a physical product (for people first create their avatars, they are given a example, watch or jewelry brands) and those with standard ‘outfit’. more experience or emotive-based brands (such as Very soon after avatar creation, people realise they perfume). want to change their appearance to better reflect their The rationale for this split is based on the ability to digital identity and create differentiation, just like the engage the resident with the brand. real world. Because of this, there is already a high number of retail outlets in Second Life, for example, Brands with physical products such as watches or selling clothing related items. So, there’s an incumbent clothing do have the ability to accurately re-create demand and an already thriving marketplace. Stardoll their products (explained in greater detail in as another example has a thriving community of girls subsequent sections) and in most respects this is a (and women) interacting with clothing and valuable opportunity to explore. After all, as explained accessory-based virtual goods. in later sections, many luxury brands are already unofficially represented in Second Life - brand owners At this current stage of metabranding - creating need to make the decision whether or not they want products and services for virtual consumption, the to own these representations themselves. Second Life retailers selling the most products are not real world brands. Instead they are virtual brand However, the key for longer-term success in virtual owners, everyday people running virtual stores from worlds for physical (real world) luxury brands is their homes. Real world luxury brand owners are yet greater than re-creating their products - the to penetrate this popular market to a significant level. opportunity lies in solving virtual world problems Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 5
  6. 6. with their brands of meeting a virtual consumption As shown below (left), the Apparel and Avatar need. Accessories categories are very well represented in Second Life. Between them there over 100,000 Non-physical brands such as perfumery have a different products available on SLExchange. different challenge - how can a fragrance be created virtually? Well, for now, it can’t! So the focus here has A question you may be asking yourself right now is: to be one of brand extension - creating concepts ‘Why do people actually want to which draw in residents with feelings towards the spend money on virtual goods?’ brand and creating experiences which leverage the The answer to this question is the primary key to values of the brand. explaining the major opportunities presented by Defining the marketplace metaverses. A virtual world is full of different people, different sexes, ages, genders and ethnicities . Before we start looking at the options available to Just like in the real world, people don’t want to all marketers in virtual worlds, it’s important to identity look the same - they want to create a digital identity and size the marketplace to determine which types of that reflects their real world person or demonstrates products (and therefore brands) are actively sold in how they choose to visualise their avatar. metaverses and the size of this market. Very shortly after an account (avatar) is created, the In terms of total financial transactions in Second Life, owner of the avatar wants to customise their on a daily basis over $1m (real US dollars) is appearance, hence the demand (and therefore supply) exchanged between parties involving over 12m of virtual items. individual transactions. Many avatars then go on to purchase land (if the Focussing on the product category, the chart above virtual world permits this). This then explains why right shows data obtained from, a people also require items related to housing - their website that allows Second Life sellers to promote virtual house. their creations. Interestingly (and of interest to brand owners of At the end of December 2008, over 200,000 different female products), within the Apparel category, over products were available on SLexchange - a sizable 70% of the products available are for women. marketplace. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 6
  7. 7. So, clearly, females are more likely to be interested in Re-creating the brand experience purchasing virtual clothes. The graph above shows the breakdown of the over 51,000 Female Apparel In terms of being able to present brands within virtual products available in Second Life.So, the top three worlds, as the imagery in this section shows, it is categories of Women’s Apparel products available via possible to re-create (and create) products extremely SLexchange, are Dresses, Outfits and Footwear, accurately. accounting for almost 30,000 products. The images below are a selection of real- world luxury brands recreated in Second Life, officially and Looking at the Men’s Apparel segment, the graph unofficially. below shows the approx. 11,000 products available. Necklace, earrings and bracelet priced L$750 at Shiny Things, a virtual only retailer. Luxury watches by Hublot on display at Hublot Island. Within the Avatar Accessories category, there are also over 30,000 individual products. Breaking down this category a little further, over 47% of this product group reside in the Jewelry and Watches category - a key sector for luxury brands. Here is the breakdown of this group. Unofficial Gucci bags for sale at L$300. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 7
  8. 8. Unofficial Rayban Aviator sunglasses for sale at L$150. Official L’Oreal Paris make-up looks available for free across Second Life. Official Mercedes Benz C-Class available for test drive on Mercedes Island. Understanding the retail environment Real world brands wishing to enter virtual spaces need to understand that the retail environment is different to the real world. Firstly, in Second Life, many brands already exist unofficially. These in most cases have been created by Unofficial Lamborghini for sale at L$1,950. individuals who act as manufacturers and distributors. This means that typically an individual with say an interest in watches will recreate a real world watch using basic building blocks known as prims. These prims can be coloured (textured) and the assembled with other prims to create shapes. Once the overall watch shape has been created, the owner of the watch assigns a monetary value to it and Unofficial Apple Imac for sale at L$150. makes it available for sale. This involves changing the settings of the prim package to allow transfer from one person to another. Typically, these cottage industry creators will also have a shop to present their goods. Rather than setting up on private islands (which is the norm for real world companies) these people locate on the mainland areas in Second Life. Now it’s time to market. The most used method of promoting goods in Second Life is by assigning key Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 8
  9. 9. words to the land hosting the virtual shop. These This then results in a package containing the product keywords are then referenced by the internal search being inserted (again) instantly into the inventory file engine. of the customer. When an avatar is looking for, for example ‘watches’ a And, here lies one of the biggest upsides of virtual search for this term will list all the areas of land in retailing - cost of sale and production. The packaged Second Life which have been set to include the word object (the product) can be purchased an infinite ‘watches’. number of times simply by avatars clicking and buying the display. There is a zero cost of sale involved. Clicking on any of the search results then results in an immediately teleport to that location. The avatar then Real brands in virtual worlds arrives in the shop and can travel around it looking for products. The following sections contain insight and assessment into real world luxury brands that have entered virtual Other virtual world platforms have other methods for worlds and established presences. attracting visitors to virtual worlds. Stardoll for example has a dedicated area called Starplaza to Product launches - Calvin Klein / Costa promote real world brands. They also make heavy use Cruises of on-site banner ads to drive traffic. Several companies have launched new products first into Second Life. These product launches have involved organised press and resident events supported by live bands and been supported by website and blogging based marketing communications. By way of demonstration, Calvin Klein was the “first global fragrance brand to launch in the virtual world of Second Life” with the virtual launch of IN2U. This Interestingly in Second Life, although it is a 3D fragrance was launched in the real world on March 21, platform, most virtual goods are presented in 2D 2007. format, as shown below. To support the launch in Second Life, CK held a ‘What are you in 2?” photography competition and gallery, encouraging residents who purchased the virtual perfume to participate. To answer the question posed earlier, CK has created virtual bottles (shown below) and residents can ‘spray’ themselves and generate a visualisation of the concept of wearing the perfume Clicking the image below right in the shop provides via animated bubbles surrounding the resident. the facility to instantly buy the owner of the object. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 9
  10. 10. Becoming increasingly popular are competitions in virtual worlds and for brands with products which are not easily transferrable, offer an excellent vehicle to get residents talking about and engaging in them. To illustrate, L’Oreal Paris ran a content to find the virtual face of Second Life. The Miss Second Life A sales mechanic was also integrated, with hyperlinks competition culminated in a virtual beauty pageant directly out of Second Life to a supporting e- and in true Miss World style the contestants were also commerce website (www. interviewed afterwards. On a slightly different theme, this time related to luxury travel , a great example of using Second Life on a tactical product launch basis is a recent campaign by Costa Cruises. The competition was also supported with beauty experts in-world offering real-world tips to interested residents. The winner of the competition received a The company re-created their latest one year supply of products. luxury liner, the Costa Serena in Second Life to coincide with the real world launch in France. The In December 2007, there was even a ‘Miss Second Life virtual effort allows visitors to explore the ship and get Universe’ competition. Representatives from 12 a feel for what it would be like to cruise on it, from countries participated in the virtual beauty pageant. anywhere in the world. The winner? Miss Greece. Competitions Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 10
  11. 11. Metabranding - Armani and Aveda Metabranding is the term used to describe taking real world brand values and translating them into a virtual context. Here’s two examples of real world companies deploying metabrand strategies in Second Life. The virtual Armani store displays virtual versions of real world clothing as well as a small selection of Hair and beauty company Aveda in conjunction with items made specifically for virtual consumption. the Aveda Institute, created a range of coloured hair styles in Second Life. The products, available in Another benefit to this specific approach is in a way, a packages are available to purchase from a dedicated new type of customer experience. Avatars are able to shop on the mainland. explore a virtual version of real world place - visiting the Milan Armani store without actually being there. From a luxury brand goods and services , this may well turn into a powerful branding tool. Another example of this approach is explained in the next section. Bringing the brand closer - Rixos This approach shows that you haven’t always got to think big when considering a virtual world project. Rixos is a Turkish-based chain of luxury hotels. In This idea is simply yet effective because real world Second Life, they have created an island presenting a brand values have crossed over into the metaverse. typical layout of one of their hotels. Armani was another luxury brand to enter Second Life, launching in late September 2007. This allowed avatars to explore the various parts of the The company decided to recreate their flagship store hotel and learn about the design values associated in Milan on a dedicated island. The store is accurately with the brand. Another benefit is global exposure modeled on the real one and themed according to the due to the worldwide population make-up of Second different product ranges. Life. Eyup Kaplan, Web Marketing Manager at Rixos said: Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 11
  12. 12. “The inspiring new trends and ever-growing number of Also, a large area of the island is dedicated to a super- global residents in SL drew our attention as a promising sized gallery of Hublot watches. This is a good horizon. With developing consumer and marketing example of using a virtual world platform to bring activity, SL will become an important world market.” consumers closer to products. Several other global hotel brands are now developing similar virtual tourism marketing initiatives. Limiting supply to create demand Brand extension (and enlargement) - As explained at the start of this case study, the pricing of virtual goods is very low. In fact, even (unofficial) Hublot goods carrying luxury brand logos and designs are In Early September 2007, Swiss watch manufacturer priced around the L$100 - L$500 level and Hublot became the first official watch brand in Second comparable to non-branded goods. Life. Note the use of term ‘official’. In fact, almost all of the popular real-world watch brands (Rolex, Omega, This pricing policy contradicts the real world prices Chanel, Breitling for example) are already available to typically associated with luxury brands, where by purchase in Second Life. definition they are more expensive than normal goods. So, where does this leave real world brands Hublot has a dedicated island in Second Life, designed wishing to enter the metaverse? to create a strongly branded customer experience. One option is to raise prices for virtual goods created by real world brands. Immediately this puts them in a luxury category. This option is yet to be seen in Second Life, however, a virtual operator has already deployed such a scheme - with much media coverage. Elexor Matador Jewelry , an in-world creator and store owner caused a stir when an unofficial version of a Cartier necklace set, the Himalia was created and It is themed into zones and promotes various aspects presented for sale in the shop. of the brand and its marketing programmes, such as sponsorships, product marketing and public relations. This campaign created attention for three reasons. Firstly, it was the first real example of virtual trademark infringement covered by real world media. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 12
  13. 13. Secondly the set was priced far higher than any other Johansson and Penelope Cruz. L’Oreal Paris promotes product in its category - L$10,000 (over $35 / £17). make-up looks associated with them and re-created them in Second Life, making them available for residents. These make-up looks were then stocked not on a dedicated island (like most real world brands chose) but instead partnered with existing virtual retailers (Metabrands) on the mainland areas of Second Life, resulting in significantly higher engagement levels with the brand. This technique maximised the existing Thirdly, even though (as explained earlier), Elexor distribution channels (retailers and therefore Matador could quite easily replicate the set as many consumers) in Second Life. times as required, only ten limited edition packages were made available. Additional brand-led activity included the creation of a gigantic handbag with supersized L’Oreal Paris The result? They were all sold and everyone knew products - another method of engaging residents in about it. Food for thought for real world luxury brand an interesting way. owners. Integrating and creating Opportunities also exist for luxury brand owners to take real world products/brands and integrate into a virtual platform. As a follow-up to the first L’Oreal Paris competition campaign, the company then deployed a second Focusing on virtual goods initiative (created by KZero) focussing on celebrity make-up looks. Stardoll is ideal for luxury brand owners in the clothing and accessories space. They have ready-made virtual stores within their Starplaza which are specifically designed to ease the integration of virtual goods based on real world items. DKNY and Sephora both offer virtual goods in Stardoll. Their stores are shown below. The DKNY store allows members to dress-up their avatars with the latest collection ranges. The company has a number of celebrity spokespeople who endorse specific products. These include Scarlett Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 13
  14. 14. The Sephora store (shown on the next page) allows members to stylize their avatar appearance using a range of cosmetic products. A key benefit of marketing on Stardoll is the moodbook. This is integrated into every store and allows real-world imagery to be overlaid on top of the store. This then allows members to click out from Stardoll directly to the real-world website. K Zero has a dedicated media pack outlining the benefits of Stardoll and contains recent campaign metrics from these two brands. Another virtual world (newly launched) taking a slightly different approach to virtual goods is Digital Dollhouse (DDH). DDH is an immersive online playspace ideal for brands Advertising in the home furnishings, lifestyle and interior design Luxury brands in virtual worlds even have their own categories. media outlets, allowing advertising to take place for Members are given near photo-realistic rooms and metabrands just like the real world. able to customise them with high quality assets based A range of different magazines and websites exist on real-world assets. purely for the discussion and commentary (editorial) and promotion (advertising) of products These include furniture, floors, wallpapers, kitchen and (predominantly fashion-based) available for purchase bath appliances and other objects. Here’s a selection.... in virtual worlds such as Second Life. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 14
  15. 15. One of most popular magazines dedicated to virtual So, as well as providing a platform for commentary fashion is Second Style. This magazine has a dedicated about luxury brands, there’s also an available website and blog with the magazine itself available to mechanic for virtual retailers to create adverts to download via PDF and of course inside Second Life. promote their creations. And, as seen below these Here’s some recent covers. adverts carry luxury brand values. Shown below is a print ad taken from the L’Oreal Paris make-up looks campaign - a concept combining both real world and virtual worlds. Other media outlets include Linden Lifestyles, Aspire and Ensembly Challenged. Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 15
  16. 16. Leveraging the advocates Parts of this case study has highlighted the prevalence of unofficial brands in Second Life. Indeed, at present, there are more unofficial real world brands in Second Life than official ones. So, what does this mean for the brand owners of these infringed properties? The KZero case study ‘ The 5 Rules of Virtual Brand Management’ fully explores and explains the options available to marketers in this scenario. Rather than seek to immediately remove unofficial versions of real world brands, a more longer term and potential valuable option is to actually work with and collaborate with the creators of the clones. Why? Because these people are much higher up the learning curve than real world marketers and have a lot more understanding of how best to position brands in a virtual environment. Shown in the graph below are the number of different shops selling a selection of real world brands in Second Life. None of these brands actually have official presences in virtual worlds, yet (Puma is about to be launched into Football Superstars). Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 16