ISSN 0253-2778

CN 34-1054/N

open
Free to Publish. Free to Read.
Open AccessOpen Access JUSTC Original Paper

Product strategy and pricing research of the luxury companies： Considering the characteristics of consumers in the new era

  • School of Management, University of Science and Technology of China, Hefei 230026,China

Cite this:
https://doi.org/10.3969/j.issn.0253-2778.2020.04.014
  • Received Date: 08 March 2020
  • Accepted Date: 20 April 2020
  • Rev Recd Date: 20 April 2020
  • Publish Date: 30 April 2020
    Abstract

  • Abstract

    Based on the research background of the oligopoly market, status utility was applied to luxury goods customization and the pricing of different products (standard and customization) in the luxury market was studied and a comparative analysis of four different product strategies was given. Four product strategies was proposed: ①product strategy with only pure-standard products, ②product strategy with customized products, ③multi product strategy that consumers can not freely choose the customization, ④multi product strategy that consumers can freely choose the customization. For these four strategies, the optimal pricing of different product strategies and the optimal decision of the company’s different production costs were explored, which led to the following conclusions: first, the effect of status utility on the pricing of customized products is more important than that of standard products; second, based on the comparative analysis of profits, the optimal choice of product strategy is given, and the choice of the company’s product strategy depends on the flexibility of production. In the expansion research, some profit analysis under the competitive market was discussed for the pure standard product strategy.

    Abstract

    Based on the research background of the oligopoly market, status utility was applied to luxury goods customization and the pricing of different products (standard and customization) in the luxury market was studied and a comparative analysis of four different product strategies was given. Four product strategies was proposed: ①product strategy with only pure-standard products, ②product strategy with customized products, ③multi product strategy that consumers can not freely choose the customization, ④multi product strategy that consumers can freely choose the customization. For these four strategies, the optimal pricing of different product strategies and the optimal decision of the company’s different production costs were explored, which led to the following conclusions: first, the effect of status utility on the pricing of customized products is more important than that of standard products; second, based on the comparative analysis of profits, the optimal choice of product strategy is given, and the choice of the company’s product strategy depends on the flexibility of production. In the expansion research, some profit analysis under the competitive market was discussed for the pure standard product strategy.
    • FullText(HTML)
  • loading
    • References(28)
  • [1]
    YEOMAN I, MCMAHON-BEATTIE U. Luxury markets and premium pricing[J]. Journal of Revenue and Pricing Management, 2006, 4(4): 319-328.
    [2]
    VEBLEN T. The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions[M]. New York: Macmillan, 1899.
    [3]
    RAO R S, SCHAEFER R. Conspicuous consumption and dynamic pricing[J]. Marketing Science, 2013,32(5): 786-804.
    [4]
    SCHADE M, HEGNER S, HORSTMANN F,et al. The impact of attitude functions on luxury brand consumption: An age-based group comparison[J]. Journal of Business Research, 2016, 69(1): 314-322.
    [5]
    DE KERVILER G, RODRIGUEZ C M. Luxury brand experiences and relationship quality for Millennials: The role of self-expansion[J]. Journal of Business Research, 2019, 102(9): 250-262.
    [6]
    JANG W E, KO Y J, MORRIS J D, et al. Scarcity message effects on consumption behavior: Limited edition product considerations[J]. Psychology & Marketing, 2015, 32(10): 989-1001.
    [7]
    BALACHANDER S, STOCK A. Limited edition products: When and when not to offer them[J]. Marketing Science, 2009, 28(2): 336-355.
    [8]
    MASLOW A H. A theory of human motivation[J]. Psychological Review, 1943, 50(4): 370-396.
    [9]
    BRONNER F. DE HOOG R. Comparing conspicuous consumption across different experiential products: Culture and leisure[J]. International Journal of Market Research, 2018, 61(4): 430-446.
    [10]
    CHAI A, KAUS W, KIEDAISCH C. Conspicuous spending and the income distribution of social groups[J]. Economic Inquiry, 2019, 57(3): 1324-1341.
    [11]
    DUBOUIS B, DUQUESNE P. The market for luxury goods: Income versus culture[J]. European Journal of Marketing, 1933, 27(1): 35-44.
    [12]
    JUNG C H, MOON H, KIM H,et al. Luxury customer value[J]. Journal of Fashion Marketing and Management: An International Journal, 2012, 16(1): 81-101.
    [13]
    KAPFERER J N. Advances in Luxury Brand Management[M]. Berlin：Springer, 2017.
    [14]
    OCASS A, MCEWEN H. Exploring consumer status and conspicuous consumption[J]. Journal of Consumer Behavior, 2004, 4(1): 25-39.
    [15]
    LEIBENSTEIN H. Bandwagon, snob, and Veblen effects in the theory of consumers’ demand[J]. The Quarterly Journal of Economics, 1950, 64(2): 183-207.
    [16]
    BAGWELL L S, BERNHEIM B D. Veblen effects in a theory of conspicuous consumption[J]. The American Economic Review, 1996, 86(3): 349-373.
    [17]
    MALAKHOV S V. Veblen effect search for status goods and negative utility of conspicuous leisure[J]. Journal of Institutional Studies, 2012,4(3): 6-21.
    [18]
    GAO S Y, LIM W S, TANG C S. Entry of copycats of luxury brands[J]. Marketing Science, 2016, 36(2): 272-289.
    [19]
    FRANKE N, SCHREIER M. Product uniqueness as a driver of customer utility in mass customization[J]. Marketing Letters, 2008, 19(2): 93-107.
    [20]
    BUTCHER L, PHAU I, SHIMUL A S. Uniqueness and status consumption in Generation Y consumers: Does moderation exist?[J]. Marketing Intelligence & Planning, 2017, 35(5): 673-687.
    [21]
    SOH C Q Y, REZAEI S, GU M L. A structural model of the antecedents and consequences of Generation Y luxury fashion goods purchase decisions[J]. Young Consumers, 2017, 18(2): 180-204.
    [22]
    DEWAN R, JING B, SEIDMANN A. Product customization and price competition on the Internet[J]. Management Science, 2003, 49(8): 1055-1070.
    [23]
    SYAM N B, KUMAR N. On customized goods, standard goods, and competition[J]. Marketing Science, 2006, 25(5): 525-537.
    [24]
    MOURTZIS D, PAPAKOSTAS N, MAKRIS S, et al. Supply chain modeling and control for producing highly customized products[J]. CIRP Annals-Manufacturing Technology, 2008, 57(1): 451-454.
    [25]
    DA SILVEIRA G, BORENSTEIN D, FOGLIATTO F S. Mass customization: Literature review and research directions[J]. International Journal of Production Economics, 2001, 72(1): 1-13.
    [26]
    IL E B, PANGBURN M. Mass customization and guardrails: “You can’t be all things to all people”[J]. Production and Operations Management, 2017, 26(9): 1728-1745.
    [27]
    LYNN M. Scarcity’s enhancement of desirability: The role of naive economic theories[J]. Basic and Applied Social Psychology, 1992, 13(1): 67-78.
    [28]
    BERGER J, HEATH C. Where consumers diverge from others: Identity signaling and product domains[J]. Journal of Consumer Research, 2007, 34(2): 121-134.
    • Supplements(0)
    • Related Articles
    • Track Citations
  • 加载中

Catalog

    |
    Get Citation
    PDF
    XML
    [1]
    YEOMAN I, MCMAHON-BEATTIE U. Luxury markets and premium pricing[J]. Journal of Revenue and Pricing Management, 2006, 4(4): 319-328.
    [2]
    VEBLEN T. The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions[M]. New York: Macmillan, 1899.
    [3]
    RAO R S, SCHAEFER R. Conspicuous consumption and dynamic pricing[J]. Marketing Science, 2013,32(5): 786-804.
    [4]
    SCHADE M, HEGNER S, HORSTMANN F,et al. The impact of attitude functions on luxury brand consumption: An age-based group comparison[J]. Journal of Business Research, 2016, 69(1): 314-322.
    [5]
    DE KERVILER G, RODRIGUEZ C M. Luxury brand experiences and relationship quality for Millennials: The role of self-expansion[J]. Journal of Business Research, 2019, 102(9): 250-262.
    [6]
    JANG W E, KO Y J, MORRIS J D, et al. Scarcity message effects on consumption behavior: Limited edition product considerations[J]. Psychology & Marketing, 2015, 32(10): 989-1001.
    [7]
    BALACHANDER S, STOCK A. Limited edition products: When and when not to offer them[J]. Marketing Science, 2009, 28(2): 336-355.
    [8]
    MASLOW A H. A theory of human motivation[J]. Psychological Review, 1943, 50(4): 370-396.
    [9]
    BRONNER F. DE HOOG R. Comparing conspicuous consumption across different experiential products: Culture and leisure[J]. International Journal of Market Research, 2018, 61(4): 430-446.
    [10]
    CHAI A, KAUS W, KIEDAISCH C. Conspicuous spending and the income distribution of social groups[J]. Economic Inquiry, 2019, 57(3): 1324-1341.
    [11]
    DUBOUIS B, DUQUESNE P. The market for luxury goods: Income versus culture[J]. European Journal of Marketing, 1933, 27(1): 35-44.
    [12]
    JUNG C H, MOON H, KIM H,et al. Luxury customer value[J]. Journal of Fashion Marketing and Management: An International Journal, 2012, 16(1): 81-101.
    [13]
    KAPFERER J N. Advances in Luxury Brand Management[M]. Berlin：Springer, 2017.
    [14]
    OCASS A, MCEWEN H. Exploring consumer status and conspicuous consumption[J]. Journal of Consumer Behavior, 2004, 4(1): 25-39.
    [15]
    LEIBENSTEIN H. Bandwagon, snob, and Veblen effects in the theory of consumers’ demand[J]. The Quarterly Journal of Economics, 1950, 64(2): 183-207.
    [16]
    BAGWELL L S, BERNHEIM B D. Veblen effects in a theory of conspicuous consumption[J]. The American Economic Review, 1996, 86(3): 349-373.
    [17]
    MALAKHOV S V. Veblen effect search for status goods and negative utility of conspicuous leisure[J]. Journal of Institutional Studies, 2012,4(3): 6-21.
    [18]
    GAO S Y, LIM W S, TANG C S. Entry of copycats of luxury brands[J]. Marketing Science, 2016, 36(2): 272-289.
    [19]
    FRANKE N, SCHREIER M. Product uniqueness as a driver of customer utility in mass customization[J]. Marketing Letters, 2008, 19(2): 93-107.
    [20]
    BUTCHER L, PHAU I, SHIMUL A S. Uniqueness and status consumption in Generation Y consumers: Does moderation exist?[J]. Marketing Intelligence & Planning, 2017, 35(5): 673-687.
    [21]
    SOH C Q Y, REZAEI S, GU M L. A structural model of the antecedents and consequences of Generation Y luxury fashion goods purchase decisions[J]. Young Consumers, 2017, 18(2): 180-204.
    [22]
    DEWAN R, JING B, SEIDMANN A. Product customization and price competition on the Internet[J]. Management Science, 2003, 49(8): 1055-1070.
    [23]
    SYAM N B, KUMAR N. On customized goods, standard goods, and competition[J]. Marketing Science, 2006, 25(5): 525-537.
    [24]
    MOURTZIS D, PAPAKOSTAS N, MAKRIS S, et al. Supply chain modeling and control for producing highly customized products[J]. CIRP Annals-Manufacturing Technology, 2008, 57(1): 451-454.
    [25]
    DA SILVEIRA G, BORENSTEIN D, FOGLIATTO F S. Mass customization: Literature review and research directions[J]. International Journal of Production Economics, 2001, 72(1): 1-13.
    [26]
    IL E B, PANGBURN M. Mass customization and guardrails: “You can’t be all things to all people”[J]. Production and Operations Management, 2017, 26(9): 1728-1745.
    [27]
    LYNN M. Scarcity’s enhancement of desirability: The role of naive economic theories[J]. Basic and Applied Social Psychology, 1992, 13(1): 67-78.
    [28]
    BERGER J, HEATH C. Where consumers diverge from others: Identity signaling and product domains[J]. Journal of Consumer Research, 2007, 34(2): 121-134.
    Recommended articles
    TrendMD
    Volume 50 Issue 4 page: 497-515
    Cover

    Article Metrics

    Article views (58) PDF downloads(220)
    Proportional views

    Copyright © Editorial Office of JUSTC, All Rights Reserved. 皖ICP备05002528号

    Supported by: Beijing Renhe Information Technology Co. Ltd    

    /

    DownLoad:  Full-Size Img  PowerPoint
    Return
    Return