What are the defining characteristics of the luxury goods industry? What is the

Question

What are the defining characteristics of the luxury goods industry? What is the industry like?

Review the information on identification of an industry’s dominant economic characteristics in Chapter 3, including Table 3.2, to help
you answer the parts of this question.

Select “yes” for those statements that accurately describe the luxury good industry, and “no” for those that do not.

Growth in the luxury goods market is expected to be flat through 2015.
(Click to select)YesNo

The luxury goods market is global in scope, with the United States representing just 30% of the market.
(Click to select)YesNo

Companies that had begun offering “affordable luxury” goods for middle-class consumers encountered very little interest
from this target market.
(Click to select)NoYes

Most luxury goods manufacturers were vertically integrated into operation of retail stores.
(Click to select)YesNo

Most luxury goods companies manufactured their own products rather than using contract manufacturers.
(Click to select)YesNo

U.S. consumers in the top 20% of household income represent a growing market for luxury goods.
(Click to select)NoYes

All luxury goods companies used strategies that attempted to create a high degree of differentiation, based on product quality,
image and reputation, customer service, styling, and store ambience.
(Click to select)YesNo

Explanation / Answer

The defining characteristics of the luxury goods industry are products that are not essential to have, but are associated with status. Luxury goods today are considered to have a higher quality than other brands. Luxury goods will also stand out among the other brands, because they are well-known and harder to obtain.

The luxury goods industry is characterized by high quality products, creative and innovative designs, exclusive feel, brand recognition, a high degree of consumer service, and a very sophisticated store ambiance. The market is divided into a three main categories:

When it comes to the physical, or functional, components of luxury products, typically these items or brands, can be identified by certain associations tied to the product’s characteristics. The average luxury brand is associated with three characteristics:

Typically, luxury brands or products will attempt to associate their brand name with these three associations and to show their target consumers that their brand encompasses these three features. The average luxury brand also has a clear brand identity and signature, places emphasis on product integrity, and offers their products at a premium price.

High income consumers usually have been the top purchasers of luxury goods; however, with the introduction of the accessible luxury category, the producers of luxury goods have seen a great increase from middle income purchasers.

Most companies in luxury goods use differentiation strategies. In comparison to many other industries, the luxury goods industry seems to be unique by various meanings. All manufacturers that are engaged in the industry follow a clear brand differentiation strategy because of the fact that there are limited possibilities to differentiate the products by various features. Luxury goods were only targeted for wealthy consumers, because products signified status.

FOR REST YES/NO QUESTIONS, CASE IS NOT PRESENTED.

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