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Top Ten Future Research Topics & The CHANCE ® -Criterion: Forecasting Success of New Luxury Products 2014 Luxury Conference, Monaco Oliver Heil (*) Armin.

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Presentation on theme: "Top Ten Future Research Topics & The CHANCE ® -Criterion: Forecasting Success of New Luxury Products 2014 Luxury Conference, Monaco Oliver Heil (*) Armin."— Presentation transcript:

1 Top Ten Future Research Topics & The CHANCE ® -Criterion: Forecasting Success of New Luxury Products 2014 Luxury Conference, Monaco Oliver Heil (*) Armin Münch (**) (*) Univ.-Prof. Dr. Oliver Heil (Ph.D.)(**) Armin Münch Johannes Gutenberg Universität Mainz CEO, Target Group Chaired Professor of MarketingFrankfurt, Germany

2 A „Top Ten“ of Luxury-Research Challenges & Opportunities When are luxury brands to successful for their own good (e.g. Porsche, LV, USM and why not Rolex(?)), i.e. resisting the temptation to expand. Brick & mortar vs internet: The previous enemy became a friend and collaborateur. Consumption-experience in the luxury segment: What is unique, special and luxurious? Luxury failures: How to prevent them, to manage them and what is their impact on the brand (e.g. was is right to cut Maybach, is the Bentley GT a failure?) Social acceptance of luxury—evolution of brands (LV used to be „old“, Rolex „is“ old, exotic skins are out again, footprints of luxorious brands matter more & more)

3 A „Top Ten“ of Luxury-Research Challenges & Opportunities The power of less: Limited Editions everywhere and no end in sight (enormous wtp but much brand damage if number of LE is wrong) Global luxury no longer European luxury: Threats due to the advent of Asian luxury brands. Evolution of luxury: future meanings beyond p,q,x, etc.—e.g. enhance quality of life instead of „luxury is when price does not matter“ (Lagerfeld) Luxury as front-runner, e.g. new retail formats, new synergetic product-forms & designs e.g. Porsche/Burmester, Hermes/Bugatti, Chopard/Aghili or Wally yacht (design). Down to business: Predicting the successin and size and growth of luxury segments.

4 High FMCG Flop Rates Europe: according to GfK, flop rate of all new brands about 70% USA: only 10-20% of new products and services succeed Subset of luxury products: seemingly slightly fewer failures but * definition of luxury (e.g. vs. premium) tricky * “missing” data as producers destroy failures Prediction of Luxury-Failures more important than, e.g. FMCGs * producers feel forced to destroy failures (see above) * brand images more vulnerable (e.g. broken Rolls more delicate than with a broken FIAT) I Introduction I 4

5 Insight * measure market potential for a product (or service) * criterion to predict for each and every single test person * selection: whether or not he/she would switch to a new product for regular use. The CHANCE CRITERION ® : switching occurs iff “the new product is viewed to be better along at least one attribute and at least of equal appeal in all, other (n-1) attributes.” Note: no trade-offs, current product as reference, status-quo as driver. I The CHANCE CRITERION ® I 5

6 Premium and luxury products Product Prediction Reality A 600.000 625.000 B 96.000 105.000 C 540.000 545.000 D 760.000 825.000 E 450.000 460.000 F 240.000 280.000 G 540.000 580.000 Note: CC typically underpredicts and, thus, which leads to a less costly error. Precisoin CHANCE ® -Criterium in Reality

7 Conceptual Assessment Challenge in luxury markets: Predicting Purchase/Switch or Not –since many luxury consumers already have a Rolex, Bentley, Hermes,… Luxury consumption correlates with cognitive and emotional involvement, (e.g. Luce et al. 1999, Kapferer 2006, 2009, Langer and Heil 2013) making new product sales difficult to predict Loss aversion –Prospect Theory (e.g. losses more important than gains (Kahneman und Tversky 1979, Hardie 1993)), endowment Effect (subjective price exceeds market price, e.g. Thaler 1980), Regret theory (regret for negative descision/purchase, e.g. Landman 1987, Sudgen 1985) Norm-Theory (preference for maintaining status quo, esp. as status quo is viewed as normal (Kahneman & Miller 1986)), Trade-Off avoidance (Kahneman & Tversky 1983, 1990, Payne et al 1993), value fct sketchy

8 PERSON 1PERSON 2PERSON 3…PERSON n Q 1: e.g. Disposition to buy Q 2: e.g. Likes Q3: e.g. Dislikes Q 4: … Q5: … CHANCE Criterion FulfilledNot fulfilledFulfilled Not fulfilled Always individually, checking on fulfillment of the CHANCE-CRITERION ® 8 I The CHANCE-CRITERION ® Model of Brand Choice I With the CHANCE method:

9 Ask simple questions 1. What brand(s) do you own or use most often? 2. Presentation of new product and, also, naming of a possible/probably price, followed by the next question: How would you describe this product to a friend of your, who does not really know this new product? 3. What do you like better about the new product? 4. What do you like less? 5. What would be a price that you deem appropirate and at which you would be likely to purchase the product? Note 1: Simple questions  robust and reliable data. Note2: Promising new development Neuro Chance to measure electrical activity in brain (electroencephalogram, EEG) for different luxury products. Using the CHANCE ® -Criterion is Surprisingly easy, fast and cost-efficient

10 10 I The CHANCE CRITERION ® and Statistics I Statistical Significance Visual

11 11 I CHANCE CRITERION ® -- Consistency Check I A few examples of responses to a new product an ad campaign.

12 In Short Extremely High Precision of Forecast Nice Error Structure Sound Theory Surprisingly Small Sample Sizes Needed Very Good Efficiencies –Time –Cost Nicely Suited Research-Instrument for Luxury Research

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