BERNARD DUBOIS

AND
CLAIRE PATERNAULT

OBSERVATIONS:
UNDERSTANDING THE
WORLD OF INTERNATIONAL
LUXURY BRANDS:
THE "DREAM FORMULA"
Marketing luxury goods is a paradox. Managers want a certain level
of diffusion for their brand in order to achieve success in the marketplace; yet, if their brand is overdiffused, it loses its luxury character. This paper empirically explores the status of international luxury brands in the United States.

n spite of its spectacular

growth over the last 20
years, the market for luxury
goods, estimated at $60 billion
by McKinsey Corp. (1990), keeps
its secrets. Although brand
names and products are highly
visible given their strong media
coverage, the processes according to which consumers acquire
and consume luxury items remain enigmatic. It seems particularly difficult to explain and
predict the conditions under
which "dreams" of luxury
emerge and how such dreams
materialize into purchase acts.
While for other high-involvement products, time-honored
rational models such as the
AIDA {Strong, 1925) or Hierarchy-of-Effects (Lavidge and
Steiner, 1961) sequences have
proven useful for understanding
the stages buyers go through,
the mechanisms underlying consumers' reactions to luxury
goods, often described as impulsive, emotional, or "extravagant," seem hidden in an impenetrable black box.
The purpose of this article is
to present the results of a study
aimed at better understanding
such mechanisms in the context
of international luxury brands.
While past research has investigated such topics as the con-

sumption habits of the affluent

(Stanley, 1988, 1991; Research
Alert, 1991), the competitive
structure of luxury markets
(Dubois and Duquesne, 1993), or
status brand adopters' sociodemographic and psychographic
characteristics (Andrus, Silver,
and Johnson, 1986; Jolson,
Anderson, and Leber, 1981), no
prior work has been published,
to the best of our knowledge, on
the specific issue of the sequence
of stages luxury brands go
through before being fully accepted by consumers. Given this
lack of research, few a priori assumptions could be developed
about the nature of these relationships. Of course, one logically anticipates that being aware
of a brand is a prerequisite to
dreaming and purchasing.
Awareness, therefore, should be
considered an early step in the
development of a relationship
between a consumer and a luxury brand. The relationship between dream and purchase,
however, is more equivocal. Following the generalization principle (McSweeney and Bierley,
1984), one could argue that buying a luxury-branded item, for
example, a fashion accessory,
activates the dream and desire to
repurchase thereby leading to
the acquisition of a collection of

Journal of ADVERTISING RESEARCHJULY/AUGUST 1995

69

OBSERVATIONS

products bearing the same prestigious name. But, in line with

those who believe in the dampening effect of purchase on attitude (for a review of the attitude-behavior controversy, see
Petty, Unnava, and Strathman,
1991, and also Pinson and Roberto, 1973), one could just as
well assert that by making the
dream come true, the purchase
act itself takes away some of the
inaccessible and therefore luxury
nature of the brand. Which one
of these two conflicting hypotheses is best supported by empirical evidence?

Method
The results to be presented
have been obtained from a recent survey undertaken in the
United States by the International Research Institute on Social Change (RISC). RISC is a
consultancy group based in
Switzerland and active in 17 of
the world major markets. In
1990, RISC decided to launch a
specific research program on
luxury goods. A representative
sample of the U.S. population
(aged 15 years and over) was
established and is now interviewed each fall. The results to
be presented come from the 1991
survey. In order to ensure sample representativeness, the
method adopted was probability
sampling. The process actually
involves two stages using a selfupdating telephone generated
sample: (1) random selection of
200 PSUs (Primary Sampling
Units) to obtain a balanced geographic dispersion, and (2) random selection of starting points
and calculation of the sampling
interval within each PSU. This
procedure accommodates the
dramatic shifts in household distribution between the 1980 and
1990 published census. Further-

70

more, it is balanced to account

for disproportionality of listed
phone numbers in one area versus another.
In total, 3,000 people were interviewed in person, at home,
using a combination of self-completed and face-to-face questions. Respondents were asked
about their acquisition habits
and feelings relative to a set of
34 luxury brands (see Table 1).
The list was developed on the
basis of answers obtained to an
unaided awareness test. A wide
variety of sectors are represented
(perfume, jewelry, fashion,
leather goods, alcoholic beverages, hi-fi equipment, etc.). The
list contains about as many
French as non-French brands,
which is consistent with the estimated 50 percent market share
enjoyed by French brand names
in the worldwide luxury market
(McKinsey, 1990).
Specifically, three measures
were taken in relation to each
brand:
Aided awareness:
Here is a list of luxury brands.
Please indicate which ones
you know at least by name.
Recent purchase:
Please indicate from which
you have bought an item during the past two years.
Dream value:
Imagine that you are given the
possibility of choosing a beautiful present because you won
a contest. Which are the five
brands you would like the
best?
It should be noted that all
measures were taken at the
brand level rather than for any
particular product category. Although the product category has
an obvious impact on purchase
and possibly dream levels, working with brand names only is in

Journal of ADVERTISiNG RESEARCHJULY/AUGUST 1995

Table 1
List of International
Luxury Brands
1.

Armani

2.

Laura Ashley

3.

Bang & Olufsen

4.

Bulgari

5.

Cartier

6.

Pierre Card in

7.

Chanel

8.

Chivas Regal

9.

Christofle

10.

Daum

11.

Christian Dior

12.

Dunhill

13. Givenchy
14.

Gorham

15.

Gucci

16.

Guerlain

17.

Hermes

18.

Lacoste

19.

Lancome

20.

Lanvin

21.

Estee Lauder

22.

Ralph Lauren

23.

Lenox

24.

Montbtanc

25. Omega
26.

Oscar De La Renta

27.

Remy Martin

28.

Revlon

29.

Rolex

30.

Shiseido

31.

Louis Vuitton

32.

Waterford

33.

Waterman

34.

Yves Saint-Laurent

OBSERVATIONS

Figure 1
Awareness and Purchase Scores

2S

40

35 -

21

at

Purchase

30 -

22
15 -

15

8
10 -

18

ifi

26

19 2
23

5 -

13
10 9 3 |

10

16 30
4
17 1

^^ 2012
24

20

30

line with the view, widely

shared in the luxury sector, that
whatever their nature and price,
all products sold under the same
brand name share a symbolic
identity and a core of values expressing the "quintessence" of
that brand. Whether they are
automobiles, wristwatches, writing instruments, or sunglasses,
all Porsche items express the
Porsche "legend" and are clearly
identified as such. Most if not all
consumers do not buy a Porsche
wristwatch because it is a good
and reliable watch but because
of the Porsche name and what it
may stand for: sports look, sophisticated design, German origin, etc. More than other products, luxury items are bought for
what they mean, beyond what
they are. Such a belief is the
very foundation for brand-exten-

25

29

1
40

50
Awareness

60

sion strategies, so extensively

used in the luxury sector (Aaker
and Keller, 1990).
While the awareness and purchase indicators used in this research are rather standard, the
"dream value" measure perhaps
deserves additional comment.
When consumers are asked to
describe their spontaneous associations with the concept of luxury, the theme of "dream" almost inevitably emerges. In a
recent consumer survey, only 36
percent of respondents disagreed with the item, "Luxury
makes me dream," while 24 percent strongly agreed with that
statement (Dubois and Laurent,
1994). Given the pervasive nature of such a theme, we felt it
was important to include such
an elusive concept in our analysis. We did not want to use

70

80

-H
90

100

a purchase-interest measure
such as an intention-to-buy indicator because we suspected that
answers would have been too
much under the influence of inhibiting factors such as the lack
of financial abilities. We wanted
people to freely express their
preferences, hence the reference
to a gift environment. We limited the list to five brands to put
consumers in a situation where
they are to make choices. We
felt that, without a limit, the
"wish list" for luxury brands
might have been rather long, at
least for some consumers, and in
the end not clearly differentiable
from an evoked set measure.
We recognize that this is not
the only way to operationalize
the "dream value" concept
which certainly deserves further
investigation.

Journal of ADVERTISING RESEARCHJULY/AUGUST 1995

71

OBSERVATIONS

Figure 2
Relationship between Awareness and Dream
50 -|

29

45 -

15
40 35 30 -

11

21

22

20 -

23

26
15 -

2
25

10 -

13

14

5 -

"
3
10 9

0 -

10

4 16 1
1' .

19

24 27"
20

20

30

40

50

60

I
70

BO

1
90

100

Awareness

Results
Figure 1 shows the scores obtained for awareness and purchase as well as their relationship. The level of awareness in
the United States varies from 5
percent (Daum) to 92 percent
(Revlon) and the purchase level
from 0.4 percent (Bulgari) to
40.9 percent (Revlon). As expected, the relationship between
awareness and purchase is
rather strong. Few people buy
luxury names they do not know
and the penetration level of a
brand is strongly affected by its
awareness score. The correlation coefficient (79 percent)
indicates that 62 percent (79
percent squared) of the variation
in diffusion levels is due to
awareness.
Figure 2 reveals an even
tighter relationship between

72

awareness and dream, even

though many brand names now
occupy different positions on the
map. The correlation coefficient
becomes 84 percent, which
means that 71 percent of the
variation in dream levels is due
to awareness. However, interestingly enough, the relationship
between purchase and dream is
much more tenuous since only
25 percent of the dream variance
is accounted for. How can we
explain such results?
Actually, the purchase-dream
relationship is difficult to assess
directly since both phenomena
are "contaminated" by awareness. In order to understand it
better, one has to "remove"
the influence of awareness.
Among other methods, this can
be done through partial correlation analysis.
When awareness is "con-

Journal of ADVERTISING RESEARCHJULY/AUGUST 1995

trolled for," the relationship becomes negative (regression coefficient = -0.5), which indicates
that the level of diffusion of a
luxury brand adversely affects its
"dream" appeal. This conclusion
gives empirical support to the
well-known "rarity principle"
underlying conspicuous consumption (Veblen, 1899; Mason,
1981) that luxury products are
perceived by consumers as rare
products; when overdiffused,
they gradually lose their luxury
character.
The previously established results can be summarized by
means of the direct relationship
between awareness, purchase,
and dream, obtained from multiple regression. Applied here, this
method not only shows an excellent adjustment to the empirical
data (coefficient of multiple determination = 0.78) but also leads to

OBSERVATIONS

Figure 3
Awareness-Purchase-Dream Relationship

DREAM
20

10

PURCHASE

20
AWARENESS

a regression equation revealing

the "dream formula":
DREAM = 0.58*AWARENESS
- 0.59*PURCHASE - 8 . 6
It should be noted that, in this
formula, the awareness coefficient is positive while the purchase coefficient is negative.
Both of them are statistically significant (see the Appendix).
Such a result has also been obtained in five major European
countries (RISC, 1991). In the
world of luxury brands, it therefore looks as if awareness feeds
dream but purchase makes
dream come true and therefore

contributes to destroy it. This is

the essence of the paradoxical
nature of the marketing of luxury goods. For many product
categories, marketing means increasing demand. In the case of
luxury, the challenge is to develop the brand without jeopardizing its appeal, largely based
on its limited diffusion level.

Managerial Implications
Each luxury brand can now be
positioned in terms of the
awareness-purchase-dream relationship. This is done in Figure
3. To facilitate readability. Figure
3 has been transformed into Fig-

ure 4 in which the X axis has

been redefined as: Awareness
minus Purchase (to allow a twodimensional representation)
while the Y axis indicates the
dream level. The regression
equation enables us to calculate
for each brand its "expected
dream/' i.e., the dream level the
brand "deserves" given its
awareness and purchase levels.
It is roughly equivalent to half
the difference between the
awareness and purchase scores.
If many luxury brands appear
to have a "normal" or close to
normal dream level, some others
enjoy a "premium" or, on the
contrary, suffer from a "dream

Journal ot ADVERTISING RESEARCH^ULY/AUGUST 1995

73

OBSERVATIONS

Figure 4
Awareness Minus Purchase
80 -r
70 - -

29

10

20

30

40

50

60

70

90

Awareness - Purchase

deficit." In the United States,

Rolex obviously belongs to the
former group and Omega to the
latter. Interestingly enough, both
brands are Swiss and active in
the same product category.
If one remembers that the
dream potential of a brand is
affected by awareness (positively) and diffusion (negatively), four situations actually
emerge, all of them having different managerial impHcations.
In some cases (situation 1), the
desire for the brand is limited
simply because the awareness is
low. Many brands in our sample
are faced with this problem in
the United States: Daum, Christofle, Bulgari, Bang & Olufsen,
among others. In this case, the
managerial recommendation is
clear: Awareness has to be developed first. Sponsoring activities, celebrity endorsements, as
well as "special event management" (Catherwood and Van
Kirk, 1992) can be very helpful.

74

For example, in 1989, as part of

the celebration of the French
revolution bicentennial, the Comite Colbert members, who include well-known luxury names
(Chanel, Dior, Lacoste) but also
many lesser known companies,
decided to organize a series of
events in New York, including a
four-month exhibition on French
Art de Vivre at the CooperFlewitt museum, a Colbert Festival on Madison Avenue, and a
Bergdorf-Goodman exhibit of
unique pieces from private
collections.
In some other cases (situation
2), the awareness is good but
the desire is below expectations,
primarily because the purchase
level is already high. In the
United States, this would seem
to be the case for Yves Saint
Laurent, for example. In such a
situation, one should refrain
from excessive licensing and
maintain highly selective distribution channels in order to pro-

Journal of ADVERTISING RESEARCH^JULY/AUGUST 1995

tect the brand equity. An interesting example of such a tight

channel management strategy is
provided by Louis Vuitton
whose policy is to control distribution through direct ownership
(or 51 percent joint ventures) of
points of sale.
Situation 3 describes just the
opposite scenario. The awareness level is not necessarily very
high, relatively speaking, but the
level of purchase is low enough
to entertain fascination. Waterford would seem to be in such a
position. The prospects for development are good provided a
careful expansion strategy is
adopted.
Finally (situation 4), the stars:
very strong awareness and
highly controlled diffusion. As
already mentioned, Rolex exemplifies this situation in the
United States. It should be noted
that Roiex also has carefully
avoided hazardous diversifications. Another excellent example

OBSERVATIONS

of a successful diffusion management strategy is provided by De

Beers. By limiting the number of
"sight-holders" (buyers) to about
200 people worldwide, deciding
to sell less rough diamonds
when the prices go down and
more when they go up, the De
Beers company has been able for
more than 60 years to manage
the delicate equilibrium between
supply and demand in the entire
diamond industry.

Conclusion
In highlighting the structural
relationship between awareness,
purchase, and dream, this article
provides luxury-goods companies with a simple yet operational tool that enables them to
diagnose the competitive
strength of their brands in any
one of their markets. Although
the results presented here concerned the whole U.S. population, the same type of analysis
obviously can be developed for
any relevant segment or subsegment. In dissecting the relationship, the article also underscores
the paradox inherent in managing luxury products. The path is
narrow between the sterility of
malthusianism and the excesses
of mass marketing. Every year,
many small luxury-goods companies disappear or lose their
independence due to not having
been able to exploit a name kept
confidential. Others lose their
identity and character in trying
to expand too quickly. The bestmanaged companies learn how
to turn the paradox to their advantage. They position themselves at the intersection of two
segments, one of authenticity
and the quest for absolute quality, and the other of role models
and social codes. Their brand
draws its fascination for one
group from the legitimacy given
it by the other.

Appendix (The interested reader will find below the full regression
results:)
Analysis of Variance for the Regression
Source of
variation

Degrees of
freedom

Sum of
squares

Mean
square

3973

1966,88

Deviations about reg.

31

1082

34.93

Total

33

5055

Due to regression

Sample R2
Adjusted R2
Std error
Intercept

56.88

.79
.77
5.91
-8.6

Standard
Regression
Standard
Variables
Mean
deviation
coefficient
error
Awareness
44.6
25.5
0.58
0.066
Purchase
8.25
9.2
-0.59
0.182
Note: To the extent that awareness and purchase are related to each other, some multicollinearity is necessarily present in our data. What constitutes "serious multicoliinearity" Is open to
debate among specialists. In their authoritative book on marketing research, Green and Tull
suggest various rules of thumb for assessing the amount of serious multicoltinearity: The
predictors should not correlate more than 0.9 (they correlate here 0.79) and the determinant of
the correlation matrix (0,4 here) should not be "too close" to zero. Furthermore, multicoliinearity only reduces the precision of estimating the coefficient of the regression equation but in
no way affects the predictive power of the relationship. Here both regression coefficients are
statistically significant as their f-value (8.77 and -3.22, respectively) indicate.

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