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For Luxury Brands, Flaunting Logo is Key in Recession

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Think the best way to promote your business during these dark economic times is to play it low-key? Think again. According to new research, a number of the world’s foremost luxury houses introduced even more conspicuously branded goods at the height of the recession, rather than abandoning prominent logos for more subdued designs.

The authors also found no evidence to suggest luxury goods manufacturers are toning it down, suggesting instead that wealthy consumers still interested in purchasing high-end items — such as designer handbags — desire items that are far from subtle.

The researchers’ theory is that before the recession, consumers used luxury brand logos to signal that they were a member the fiscal elite. During a recession, consumers may be trying to signal that “they are still prospering, and that they’re doing just fine despite the recession,” said Joseph Nunes, a business professor at USC Marshall School of Business.

And, the authors concluded, not only are consumers still interested in the luxury goods market, they are willing to pay premium prices for their designer goods.

Utilizing data collected before and in the midst of the 2008-2009 recession from the world’s top luxury goods manufacturers Louis Vuitton and Gucci, the researchers found “products introduced during the recession actually display the brand far more prominently than those products which were withdrawn.” This resulted in designer handbags that were more conspicuously branded than before the recession.

Nunes said he and his fellow researchers launched the study in response to reports that consumers were shying away from loud logos and conspicuous consumption due to the financial crisis. “We asked, ‘Is this true?’ Because it didn’t look that way on the street. And we found the data tell a much different story.”

“We decided to look at consumer behavior from the firm side to see if companies were responding to all of these reports of consumers no longer wanting to engage in conspicuous consumption. Yet, no firm in our study toned things down by offering less conspicuously branded products,” Nunes said.

Additionally, companies either maintained or increased the extent of logo-laden products in their advertising.

The study also found:

  • If consumers had demanded fewer conspicuously branded products during the recession, companies would have responded with more understated designs. Instead, the researchers observed the exact opposite: Companies produced and advertised goods that continued prominently displaying their logos, or displayed them more prominently.
  •  If luxury goods manufacturers failed to meet consumers’ demand for less conspicuously branded goods, profitability should have suffered. Instead, the parent companies of these luxury firms “appeared to have fared well during the period in question.”
  • Luxury handbag superpowers such as Louis Vuitton and Gucci increased their prices, on average, across their handbag product lines.

The data, said Nunes, “suggests that these companies are reading the consumers correctly. These are savvy companies that really understand their customers; they understand that they cater to a certain segment that desires products used to signal their status. That desire doesn’t go away, even in hard times.”

Nunes co-authored the study with Xavier Drèze, a professor at UCLA's Anderson School of Management and USC Marshall School of Business doctoral student Young Jee Han. Their research will appear in an upcoming issue of the Journal of Consumer Psychology.

Business News Daily Editor

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