in Virtual Worlds
A KZero Worldswide report
Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 1
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
Brand and marketing
activities in these digital
are also rationalised and
assessed, along with
strategies for companies
looking to enter this
Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 2
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
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
extremely popular MMOG (massive multiplayer online
game) but the only real similarity is the fact that they
are both virtual worlds.
Rest of World
Importantly, whereas the average age of a Warcraft
US player is 17, for Second Life, the average age is 32. It is
this fact which stimulated the interest in major brands
to consider entering Second Life. Below (next page) is
the age range spread for residents.
Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 3
The graph below shows the regional breakdown of
fashion-themed world Stardoll.
Rest of World
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
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
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
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.
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
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.
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 SLexchange.com, a people also require items related to housing - their
website that allows Second Life sellers to promote virtual house.
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.
Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 6
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
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
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
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
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. ckin2u.com). 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
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.
Luxury Brands in Virtual Worlds: A KZero Worldswide Case Study. Copyright 2006 - 2009 Page 10
Metabranding - Armani and Aveda
Metabranding is the term used to describe taking real
world brand values and translating them into a virtual
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
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
“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)
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
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
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.
Integrating and creating
Opportunities also exist for luxury brand owners to
take real world products/brands and integrate into a
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
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
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
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
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
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
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
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