Brand Equity Via Purchase Decision
A common trope about luxury goods is to question the pertinence of paying more for utilities that a mass produced article already offers for a fraction of the price. It is not always easy to break down what makes a luxury article a more compelling choice over a mass produced one, but looking at the purchase decision process could help to put things under a new light.
In his 1987 Consumer Buying Behaviour model, Prof. Henry Assael of NYU suggested that most consumer buying decisions could be divided into 4 categories: Complex Buying, Dissonance Buying, Variety Seeking and Habitual Buying behaviour.
The Consumer Buying Behaviours
Assael placed each of these 4 behaviours on a matrix that shows the level of differentiation between a brand and its competitors and its efforts to communicate it; and the consumer’s effort in researching information before making an educated choice.
Prof. Henry Assael’s model of Consumer buying behaviour
The purchase of a house involves a lot of research on the consumer’s end and there are many details that make one option different than another. This typically corresponds to a Complex Buying Behaviour.
The purchase of an electric appliance involves a lot of research on the consumer’s end, but there are often little differences between various options. The consumer will thus seek confirmation that they have made the right choice. This typically corresponds to a Dissonance Buying Behaviour.
The Variety Seeking Behaviour involves goods or services where the customer seeks variety even though they are satisfied. This can typically be services such as eating out or ordering takeout food. If the consumer had Indian food yesterday, they might go for Thai today and Mexican tomorrow.
The Habitual Buying Behaviour includes articles that involve very little communication from the brand and very little research on the consumer’s end, such as sugar for example. Price is often the determining factor.
Applying this Model to the Luxury or Watches Market
Transposed to luxury goods or watches, Assael’s model outlines the differences between brands, according to the buying decision process that they involve.
The author will be referring to watches price segments as they are used in statistics of the Swiss Watchmaking Federation FHS: Low End (below USD 200), Low Middle (USD 200 to 500), High Middle (USD 500 to 3,000) and High End (above USD 3,000).
Patek Philippe Aquanaut 5167A, image credit A Collected Man
Watches that fit the Complex Buying behaviour typically have a high differentiation from competitors. Patek Philippe, illustrated by the Nautilus above, extensively communicates about its differentiators. Their tagline « You never actually own a Patek Philippe. You merely look after it for the next generation » sums up the brand promise that their products will last beyond a lifetime.
On the consumer’s end, the buying decision involves a lot of research into the brand’s history and possibly visiting a local authorised dealer on several occasions before making the purchase. These brands will typically use exclusive or selective distribution.
Other institutional brands such as Bell & Ross, Breitling, Cartier, Officine Panerai, Omega, Rolex, TAG Heuer or Tudor also fit this category, and they often have one or more iconic models that are associated with the brand. A few young companies have also managed to create a similar iconic image that fuels their brand equity: Bremont, Christopher Ward, HYT, MB&F, Meistersinger or Nomos, to name a few.
A recurrent marketing gimmick in this category consists in developing a proprietary movements to increase differentiation.
This category would typically include brands with a long history and a good value proposition, but that often lack strong differentiators and incidentally use a lot of off-the-shelf movements. A consumer will usually hesitate, go back and forth between two brands, and still need validation after having purchased from one. As an example, the Freelancer model in the image above is very similar to the TAG Heuer Carrera or the Louis Erard Sportive Chronograph, so choosing one over the other is a difficult task.
This is typically where we would find institutional brands such as Blancpain, Breguet, Girard Perregaux, Jaeger-leCoultre, Vacheron Constantin and Zenith for the High-End price segment (above USD 3,000); and Baume & Mercier, Longines, Maurice Lacroix, Oris and Raymond Weil for the High Middle price segment ($ 500 to 3,000).
Overall, institutional Swiss brands have gradually been abandoning this category to focus on the High Middle price segment (USD 500 to 3,000), in the hope of generating the same turnover with smaller volumes.
« Since 2000, Swiss watches costing less than $1,000 have seen their unit sales halve, while watches costing more than $5,000 have seen volumes triple. ». — John Thornhill, February 2020 Financial Times
This category would typically include brands that do not have a long history, but try to compete on design and marketing strategy. The leading pack includes brands such as Daniel Wellington, MVMT, Filipo Loreti or Vincero, who have found ways to leverage social media to give customer a feeling of variety.
This is also where crowdfunded brands would be included together with micro brands (i.e. brands that are run as a side business by their owner and operate through direct sales). They combine variety with exclusive distribution and delayed gratification, which itself is a trendy form of brand experience. From 2017 onwards, these brands have started to move towards Swiss Made and higher price points while maintaining their uniqueness, which slowly moves them towards a Complex Buying behaviour.
To a less extent, designer brands such as DKNY, Emporio Armani, Tommy Hilfiger could also fit into the Variety Seeking category because of the variety that they appear to offer, through an extension of the designer’s fashion universe. Overall, their price segment is often Low Middle (USD 200 to 500) and their distribution is more intensive than selective.
Lorus, image source Brandfield
This category would typically includes brand that compete on price. They don’t communicate extensively on their brand promise, and they often use intensive distribution (they are easily found in high streets and big box stores). It can include Low Middle brands such as Citizen, Seiko or Tissot, but also Low End budget brands such as Lorus, Q&Q, Pulsar, Sekonda or Timex.
If a Brand Cannot be Original, it Needs to be Cheap.
Assael’s Buying Behaviour model allows to visualise how distinctiveness and high or low price contribute to brand equity. The best selling luxury brands are in the Complex Buying category, the social media and designer brands are in the Variety Seeking category; and the budget brands are in the Habitual Buying category. In short, if a brand is original and expensive, simply original or simply cheap, it has chances of faring well.
« There is a base of stability at either end of the market, among the $300-$999 price band, as well as watches priced $25,000 and above. » — Rob Corder, May 2019 WatchPro
The Dissonance Buying behaviour category incidentally seems to be the most difficult one, and this is corroborated by the fact that the High Middle price segment is reportedly one of the most difficult one.