Markdowns in Seasonal Conspicuous Goods

In common parlance, luxury and markdowns are, in many respects, contradictory concepts. Markdowns decrease product exclusivity and hence consumers’ willingness to pay (i.e., snob effect) since most consumers purchasing luxury desire uniqueness. Markdowns also encourage strategic (forward-looking) consumers to wait for lower prices (i.e., strategic effect). Yet, luxury retailers frequently adopt markdowns in practice to stimulate the demand for their seasonal products (i.e., sales effect). To study the impact of these three countervailing effects on a luxury retailer’s markdown policy and rationing strategy, this paper develops a game-theoretic model with strategic and exclusivity-seeking consumers who have heterogeneous (high and low) valuations. We characterize a luxury retailer’s equilibrium markdown and rationing strategies, and find that the retailer induces a buying frenzy (i.e., selling deliberately less than the demand) to increase consumers’ willingness to pay when they are sufficiently exclusivity-seeking. We show that the retailer’s markdown policy depends on consumers’ desire for exclusivity when the proportion of consumers with high valuation is not too high or too low. Interestingly, we find that, in such cases, consumers’ higher desire for exclusivity does not motivate the retailer to increase exclusivity and to adopt uniform pricing. To the contrary, it motivates the retailer to decrease the exclusivity and to adopt markdowns. By doing so, we identify exclusivity-seeking consumer behavior as another rationale behind markdown pricing. Lastly, we find that, when selling to exclusivity-seeking consumers, the negative impact of strategic consumer behavior is lower; however, ignoring it can be more costly

Nestašica kao poželjna karakteristika luksuznih marki u marketingu usmjerenom milenijalcima

Purpose – Marketing literature considers scarcity a mechanism that increases the desirability of the offer and an inherent attribute of luxury products. This market needs to capture the millennial segment. The objective of this paper is to develop a proper scarcity strategy to be used when connecting luxury brands to millennials. Design/methodology/approach – An empirical study based on an experimental design was carried out to test the effect of each of the strategies (second line, my luxury, or exclusive selection of cheaper products) on different dimensions of how millennials perceive luxury brands (refinement, elitism, and hedonism), looking for causality relationships. Findings – The hedonism factor, closely connected with purchase experience, seems to be the most valuable for millennials and best encouraged by the second line strategy. In this way, luxury brands draw millennials into their market in a natural way, through an accessible price. But the second line strategy could imply a process of brand devaluation for the traditional customer base. Limitations – The difference in the results obtained using the “current shopping intention” and “future shopping intention” variables deserves more attention. Different ways of measuring future shopping intention could be applied to test the effects on the results. Originality/value – A different methodology, that is, an experimental study is presented to compare marketing strategies in the luxury market. In this way, a better relationship between exclusivity and the needs of millennials can be established as regards their attraction to luxury brands.Svrha – Marketinška literatura razmatra nestašicu kao mehanizam koji povećava poželjnost ponude i svojstveni atribut luksuznih proizvoda. To tržište treba dosegnuti segment milenijalaca. Cilj je rada razviti odgovarajuću strategiju nestašice za povezivanje luksuznih marki s milenijalcima. Metodološki pristup – Provedeno je empirijsko istraživanje temeljeno na eksperimentalnom dizajnu kako bi se ispitao utjecaj svake strategije (druga linija, moj luksuz ili ekskluzivni izbor jeftinijih proizvoda) na različite dimenzije načina na koje milenijalci percipiraju luksuzne marke (profinjenost, elitizam i hedonizam),u potrazi za uzročno-posljedičnim odnosima. Rezultati i implikacije – Čini se da je čimbenik hedonizma, usko povezan s iskustvom kupovine, najvrjedniji za milenijalce i najbolje ga podupire strategija druge linije. Na ovaj način luksuzne marke privlače milenijalce na svoje tržište prirodnim putem po pristupačnoj cijeni. No, strategija druge linije bi mogla implicirati proces devaluacije marke (pripisivanja negativnih značajki marki) za tradicionalnu bazu potrošača. Ograničenja – Razlika u rezultatima dobivenim varijablama “trenutna namjera kupovine” i “namjera buduće kupovine” zaslužuje više pozornosti. Primijeniti se mogu različiti načini mjerenja namjere buduće kupovine kako bi se istražili učinci na rezultate. Doprinos – Korištena je drugačija metodologija, eksperimentalni dizajn, za usporedbu marketinških strategija na tržištu luksuznih proizvoda. Na ovaj se način može uspostaviti bolji odnos između ekskluzivnosti i potreba milenijalaca zbog njihova privlačenja luksuznim markama

Optimal pricing strategy:How to sell to strategic consumers?

Technological advances are preparing consumers to plan their purchases strategically. Selling to strategic consumers at a fixed price forgoes the profit from salvaging inventory, whereas high-low pricing, as a ubiquitous pricing strategy, is costly due to the offered markdown discount. This research explores the overall impact of consumer's strategic buying behaviour on a pricing strategy, and identifies conditions where fixed pricing, strategic high pricing, or high-low pricing is the best approach by analytically comparing the profits of the three pricing strategies. Our results show that high-low pricing is appropriate only if the offered markdown discount is relatively small. If strategic consumers have a small population and the needed markdown discount is relatively large, retailers can ignore strategic buying behaviour and sell products at a fixed price. Our results emphasize that the markdown discount for clearance sales and the market structure of heterogeneous consumers play vital roles in determining the optimal pricing strategy

Pricing decision with conspicuous customers: quick responses versus value-added services

In order to eliminate the negative effects of customer strategic behavior, retailers often adopt quick response or value-added services. While in a luxury market with conspicuous customers, retailers’ pricing decisions of these two strategies become more complicated. This paper studies a supply chain with a retailer serving a mixture of conspicuous and ordinary strategic customers. We develop three models so that the retailer provides i) neither quick response nor value-added services; ii) only quick response; iii) only value-added services. Subsequently, we analyze the impacts of conspicuous customers on quick response and value-added services by pricing and strategy comparisons. The model further extends to the situation including both strategies. The results show that, firstly, when the proportion is less than a threshold, the retailer should adopt a low price strategy, and vice versa. Besides, the quick response could induce the retailer to adopt high price while value-added services inhibit it. Secondly, the customer conspicuous behavior can motivate retailers to provide quick response and inhibit their value-added services. Finally, by observing the retailer’s decisions when they can adopt two strategies simultaneously, we find that the existence of quick response can amplify the benefits of value-added services

Scarcity as a desirable attribute of luxury fashion brands in millennial marketing

Purpose – Marketing literature considers scarcity a mechanism that increases the desirability of the off er and an inherent attribute of luxury products. This market needs to capture the millennial segment. The objective of this paper is to develop a proper scarcity strategy to be used when connecting luxury brands to millennials. Design/methodology/approach – An empirical study based on an experimental design was carried out to test the eff ect of each of the strategies (second line, my luxury, or exclusive selection of cheaper products) on different dimensions of how millennials perceive luxury brands (refi nement, elitism, and hedonism), looking for causality relationships. Findings – The hedonism factor, closely connected with purchase experience, seems to be the most valuable for millennials and best encouraged by the second line strategy. In this way, luxury brands draw millennials into their market in a natural way, through an accessible price. But the second line strategy could imply a process of brand devaluation for the traditional customer base. Limitations – The diff erence in the results obtained using the “current shopping intention” and “future shopping intention” variables deserves more attention. Different ways of measuring future shopping intention could be applied to test the eff ects on the results. Originality/value – A diff erent methodology, that is, an experimental study is presented to compare marketing strategies in the luxury market. In this way, a better relationship between exclusivity and the needs of millennials can be established as regards their attraction to luxury brands.Svrha – Marketinška literatura razmatra nestašicu kao mehanizam koji povećava poželjnost ponude i svojstveni atribut luksuznih proizvoda. To tržište treba dosegnuti segment milenijalaca. Cilj je rada razviti odgovarajuću strategiju nestašice za povezivanje luksuznih marki s milenijalcima. Metodološki pristup – Provedeno je empirijsko istraživanje temeljeno na eksperimentalnom dizajnu kako bi se ispitao utjecaj svake strategije (druga linija, moj luksuz ili ekskluzivni izbor jeftinijih proizvoda) na različite dimenzije načina na koje milenijalci percipiraju luksuzne marke (profi njenost, elitizam i hedonizam),u potrazi za uzročno-posljedičnim odnosima. Rezultati i implikacije – Čini se da je čimbenik hedonizma, usko povezan s iskustvom kupovine, najvrjedniji za milenijalce i najbolje ga podupire strategija druge linije. Na ovaj način luksuzne marke privlače milenijalce na svoje tržište prirodnim putem po pristupačnoj cijeni. No, strategija druge linije bi mogla implicirati proces devaluacije marke (pripisivanja negativnih značajki marki) za tradicionalnu bazu potrošača. Ograničenja – Razlika u rezultatima dobivenim varijablama “trenutna namjera kupovine” i “namjera buduće kupovine” zaslužuje više pozornosti. Primijeniti se mogu različiti načini mjerenja namjere buduće kupovine kako bi se istražili učinci na rezultate. Doprinos – Korištena je drugačija metodologija, eksperimentalni dizajn, za usporedbu marketinških strategija na tržištu luksuznih proizvoda. Na ovaj se način može uspostaviti bolji odnos između ekskluzivnosti i potreba milenijalaca zbog njihova privlačenja luksuznim markama

Green Veblen effect: Sustainability in pollution management

We know that green products may initially exhibit a Veblen effect–demand increasing with prices–often followed by a decrease in price. The global understanding of these joint phenomena still needs to be improved, impeding appropriate profit-maximizing policies. Our article fills the gap by tying sustainable dynamic policies to pollution management with green consumers. This article develops an optimal control framework for production and pollution abatement, accounting for both the demand-side, with green consumption, and the supply-side, with polluting production. Results investigate the conditions characterizing the initial green Veblen phenomenon and show how to manage a green Veblen product over time. Our results pave the way to more profitable strategies accounting for sustainability.Stanko Dimitrov thanks the Natural Sciences and Engineering Research Council of Canada for partially supporting this work

Consumer rapport to luxury : Analyzing complex and ambivalent attitudes

The very nature of luxury goods, the variety of consumption situations and the everlasting philosophical debate over luxury lead to particularly complex and ambivalent consumer attitudes, as evidenced by a first study based on the content analysis of in-depth interviews. A second study, based on surveys in twenty countries using finite mixture modeling, identifies three types of consumer rapport to luxury.luxury; ambiguity; attitude measurement; consumer behavior

Who wants a price discount? The differential effects of price discounts on luxury brands and fast­-fashion brands

The fashion industry is a significant contributor to the global economy, and marketing strategies, such as price promotions, are commonly used to attract customers and promote sales. However, the impact of these promotions on consumers' perceptions of product quality and value can vary depending on the type of product. This study aims to investigate the effect of price promotions on consumers' perceptions of quality and value for apparel products, as well as the impact on consumer’s self­esteem and social­-display­-self­-esteem, with a focus on the differences between luxury fashion and fast-fashion brands. The research employed a between­-subjects experimental design and collected and analyzed survey data to compare how price discounts impact fast­-fashion and luxury fashion brands in terms of their effects on consumers' perceptions and behavior. The findings revealed that price promotions have negative effects on the perceived value of luxury goods, but the inverse effect was observed on fast-­fashion brands. Regarding perceived quality, luxury-­fashion brands, which rely on their image and reputation to convey a sense of high quality, are more sensitive to the negative effects of price promotions, while fast­-fashion brands are less affected. Additionally, consumers in the luxury-­promotion category had higher self­-esteem than those in the fast­-fashion promotion category, and consumers had higher levels of social­-display-­self­esteem, when consuming luxury­-fashion brands. This dissertation provides theoretical and managerial implications for fashion retailers and marketing management in understanding the potential positive and negative effects of price promotions on apparel consumption for different brand categories.A indústria da moda contribui significativamente para a economia global, e neste setor, faz-se um uso constante de promoções para atrair clientes e aumentar as vendas. No entanto, o impacto destas promoções na perceção de qualidade e valor dos consumidores pode variar dependendo do tipo de produto. Este estudo visa investigar o efeito das promoções na perceção de qualidade e valor que os consumidores atribuem ao vestuário, bem como o impacto na sua autoestima, e na autoestima que resulta da exibição pública dos produtos, com foco nas diferenças entre marcas de luxo e fast-fashion. Foi utilizado um design experimental entre indivíduos, tendo sido recolhidos e analisados dados através de um questionário online, para comparar os efeitos de promoções nas perceções e comportamentos dos consumidores, nas diferentes categorias de marcas. As conclusões revelaram que as promoções têm efeitos negativos no valor percebido dos bens de luxo, mas o efeito inverso foi observado nas marcas de fast-fashion. Relativamente à qualidade percebida, as marcas de luxo, que dependem da sua imagem e reputação, são mais sensíveis aos efeitos negativos das promoções, do que as marcas de fast-fashion. Adicionalmente, os consumidores da categoria de promoção de luxo apresentaram níveis de autoestima superior aos da promoção de fast-fashion, e níveis mais elevados de autoestima resultante da exibição pública dos produtos ao consumirem marcas de luxo. Esta dissertação proporciona implicações teóricas e práticas de gestão na compreensão dos potenciais efeitos positivos e negativos das promoções no consumo de vestuário para diferentes categorias de marcas