Consumer Perception of Luxury Fragrance Brand Advertising: Measuring the Relative Impact of Brand and Sub-Brand

By DeFanti, Mark; Bird, Deirdre et al. | Competition Forum, July 1, 2012 | Go to article overview

Consumer Perception of Luxury Fragrance Brand Advertising: Measuring the Relative Impact of Brand and Sub-Brand


DeFanti, Mark, Bird, Deirdre, Caldwell, Helen, Competition Forum


EXECUTIVE SUMMARY

Companies in the beauty industry spend millions of dollars on marketing new fragrances. Hence, one of the biggest decisions brands make when creating a new fragrance is what to name it. This paper investigates the relative impact of the brand and sub-brand featured in a new luxury fragrance's advertisement upon consumers' willingness to smell the fragrance and compares their effects among well-known brands and less well-known brands.

Keywords: Brand, Sub-brand, Advertising, Luxury, Fragrance

INTRODUCTION

The global fragrance industry is expected to reach $33.6 billion by 2012. However, growth rates in the U.S. market fell by 10% in the first half of 2009, sparking concern in the industry. The main cause of this downturn stems from a decline in women's new launch activity (a decrease of 31% over the same period in 2008). Growth in this market still continues with the men's new launch activity (up 23%) and in prestige fragrances priced at $100 and above: this part of the market grew by 6% in dollar value. Growth is also evident in the global market, where sales of fragrances increased in 2008, for example, by 33% in China and 3% in Italy and France (Brunette, 2009).

Companies such as L'Oreal, Estee Lauder and Coty spend tens of millions of dollars on marketing new fragrances. Much of this expenditure goes toward advertisements displaying beautifully crafted bottles and globally recognized models. Fragrances allow one to buy into "the dream," whether that is a luxury brand such as Chanel or Armani or a celebrity lifestyle such as Jennifer Lopez or Sean John. It often serves as an entry product for luxury brands, the ultimate accessory for designer brands or a piece of the lifestyle of celebrities. The fragrance industry relies heavily on high profile and expensive advertising to launch fragrances and pull consumers into the store. It is not unusual for a company to spend up to one half of the expected first year sales on advertising. For example, it is estimated that Estee Lauder and L'Oreal each spent $20 million on anticipated sales of $50 million for their launch of "Sensuous" and "Notorious," respectively (Born, Naughton and Evans, 2008). Hiring world-renowned actresses such as Nicole Kidman (Chanel No. 5 Eau Premier), Gwyneth Paltrow (Estee Lauder Sensuous), Eva Mendes (Calvin Klein Secret Obsession) and Anne Hathaway (Lancome Magnifique) only adds to the high cost of launching a fragrance. Coty is estimated to have spent $50 million globally on advertising Secret Obsession, with expected sales of $120 million in the first year.

This paper investigates the relative impact of the brand and sub-brand featured in 10 new luxury fragrance advertisements (summarized in Table 1) upon consumers' willingness to smell the fragrance.

LITERATURE REVIEW

The Appeal of Branding and Sub-branding

Brand names have become the most valuable assets for many companies because new product introductions are expensive, the marketplace is crowded, consumers are reluctant to try new products, and successful brands have a long life span over which they provide higher returns (Kohli & Thakor, 1997). Kidder Peabody estimated that with costs of new product introductions reaching $100 million and failure rates in the vicinity of 75 percent, it would cost a company $400 million to have a successful brand. On an average day consumers are exposed to 6000 advertisements and, each year, to more than 25,000 new products. Brands help consumers cut through the proliferation of choices available to consumers (Davis, 2002).

It is generally believed that improved brand awareness is dependent upon the manner in which brand names are chosen: success may depend upon being simple and easy to pronounce or spell; on being familiar and meaningful; or on being different, distinctive and unusual (Robertson, 1989). In addition, fragrance brand names can be chosen to communicate abstract considerations. …

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