Co-creating value for luxury brandsCaroline Tynan ⁎, Sally McKechnie, Celine Chhuon Nottingham University Business School, UK a b s t r a c t a r t i c l e i n f o Article history: Received 1 July 2008 Received in revised form 1 January 2009 Accepted 1 August 2009 Keywords: Value Co-creation Types of value Customer value framework Luxury brands The global market for luxury brands has witnessed dramatic growth over the last two decades but the current challenging economic environment contributes to the difficulty brand owners experience in ensuring that customers perceive sufficient value in their luxury brands to compensate for the high prices. According to recent service-oriented research, customers and suppliers co-create value as a result of a shift from a firm- and product-centric view of value creation to one that focuses on personalized brand experiences. In this paper, the authors develop a theoretical framework of types of value for luxury brands, and use case study research to identify processes of value creation in this particular setting. The findings highlight the variety of interactions taking place between luxury brand owners, their customers and members of their respective networks, which help to differentiate luxury brands and co-create a superior value proposition. © 2009 Elsevier Inc. All rights reserved. 1. Introduction The global market for luxury brands has grown rapidly over the past two decades. Estimated to be worth $263billion in 2007 which represents a 31% increase over the past five years, predictions indicate a 71% growth over the next five years, largely fueled by high demand from emerging economies (Verdict, 2007). In Britain, consumer expenditure on luxury goods increased by 50% between 1994 and 2004 compared to a 7% increase for non-luxuries (Keane and McMillan, 2004) whereas in France the luxury fashion sector alone is the fourth largest revenue generator (Okonkwo, 2007, p.1). This phenomenal rate of growth and challenges inherent in marketing luxury brands ensure that practitioners and recently academics regu- larly examine and analyse the marketplace. Although luxury con- sumer demand in the West appears to be waning due to the credit crunch, property crash and a slowing world economy (Teather, 2008), the appetite for luxury brands is growing elsewhere in the emerging economies of China, India, Asia, the Middle East and Latin America (Verdict, 2007; Chadha and Husband, 2006). The marketing of luxury goods requires a fine balancing act to satisfy the increasing demand in the global marketplace, while safeguarding the brands' cachet and exclusivity in the face of challenges fromthe rise of counterfeiting (Bian and Veloutsou, 2007), parallel imports, brand overextensions, and adoption by members of inappropriate subcultures (Bothwell, 2005). Luxury goods marketing is complex and frequently counter-intuitive to the extent that Bastien and Kapferer (2009, p.2) state that “classical marketing is the surest way to fail in the luxury business”. Successful luxury goods marketing requires the customer to perceive sufficient value in the luxury good to compensate for the high price charged, particularly in times of recession. Therefore, understand- ing the types of value sought and the processes of value co-creation is important. In light of the above, this paper addresses the nature of value for luxury brands and the ways in which value co-creation takes place. The authors seek to explore conceptually the meaning of value for luxury brands, and empirically investigate how firms and consumers co-create value in the luxury market. The paper proceeds first by reviewing the conceptualization of brands in general and luxury brands specifically, then developing a theoretical framework of types of customer value for the luxury market. Next, the authors outline the research methodology employed and discuss key findings from the empirical analysis of types of value for luxury brands, the nature of the value creation network and processes of value co-creation. Finally, the paper draws conclusions, considers managerial implications and offers suggestions to enable luxury brand owners to keep in tune with their customer base and differentiate themselves more effectively. 2. Conceptualizing the brand Although the academic and practitioner branding literature is extensive, finding a universally accepted definition of the term‘brand’ remains elusive. As a result of the multifaceted nature of the concept a multiplicity of definitions and contextualized understandings of its operationalization exist (Gabbott and Jevons, 2009; Jevons, 2007; Brodie et al., 2006). The recent developments of two classification schemes for brand conceptualization using historical analyses (Jevons, 2007; Stern, 2006) form the basis of further work (Buchanan-Oliver et al., 2008). By applying the historical-analysis method to multiple Journal of Business Research 63 (2010) 1156–1163 ⁎ Corresponding author. Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, UK. Tel.: +44 115 846 6978. E-mail address:
[email protected] (C. Tynan). 0148-2963/$ – see front matter © 2009 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2009.10.012 Contents lists available at ScienceDirect Journal of Business Research meanings of the term ‘brand’, Stern (2006) proposes a quadripartite classification scheme which categorizes the construct according to nature (literal and metaphoric), function (entity and process), locus (world and mind) and valence (positive and negative). Jevons (2007) alternatively traces the development of ‘brand’ definitions through a historical meta-analysis and identifies six key components of brand definitions in his review (i.e. identity, functionality, symbol(ism), sustainability, differentiation, and value creation/delivery). He incor- porates them into the following integrated definition: “A brand is a tangible or intangible concept that uniquely identifies an offering, providing symbolic communication of functionality and differentia- tion, and in doing so sustainably influences the value offered.” According to Buchanan-Oliver et al. (2008), having so many key com- ponents renders this classificationunnecessarily complicatedandthere- fore they conflate the classification to three components (i.e. symbolic, functional and psychological). They also argue that Jevons' (2007) classification does not satisfactorily capture the experiential component of de Chernatony's (2002) brand definition. After applying a combined classification scheme for brand conceptualization based on conflated Jevons (2007) and Stern (2006) to their own analysis of contemporary brand perspectives, they conclude the need to address the experiential dimension of the brand as well. 3. Conceptualizing the luxury brand Traditionally, much of the academic literature on luxury goods comes from a variety of disciplines such as history (e.g. Berry, 1994), economics (e.g. Leibenstein, 1950; Veblen, 1899) and sociology (e.g. Bourdieu, 1984). However, a growing level of interest in the market- ing literature exists (Truong et al., 2008) across a variety of areas: the nature and definition of luxury goods (Vigneron and Johnson, 1999, 2004; Catry 2003; Vickers and Renand, 2003; Dubois and Czellar, 2002; Nueno and Quelch, 1998; Kapferer, 1997; Dubois and Duquesne, 1993; Veblen 1899); competitive structure of luxury mar- kets (Chadha and Husband, 2006; Dubois and Duquesne, 1993); issues relating to the democratization of luxury (Luxury Institute 2007; Twitchell 2002) such as extending the market while retaining the luxury cachet (e.g. Giacalone, 2006; Catry, 2003; Silverstein and Fiske, 2003; Dubois and Czellar, 2002; Nueno and Quelch, 1998) and trading up for luxury goods (Silverstein and Fiske, 2003, 2007); mar- ket segmentation (Dubois et al., 2005; Dubois and Duquesne, 1993); conspicuous consumption (Truong et al., 2008; O'Cass and McEwen, 2004) as opposed to prestige-seeking consumer behavior (Vigneron and Johnson, 1999); online presence for luxury brand marketing (Dall'Olmo Riley and Lacroix, 2003; Kapferer, 1997, 2000); counter- feiting (Bian and Veloutsou, 2007; Giacalone, 2006), and the meaning of luxury goods. However, in spite of this broad literature on the luxury market, researchers have yet to address the meaning of value and the value creation process for luxury brands. Understanding the nature of value for luxury goods requires con- sideration of what constitutes a luxury brand. Defining luxury goods or brands is difficult (Vigneron and Johnson, 1999; Dubois and Duquesne, 1993). Luxury goods exist at one end of a continuum with ordinary goods, so where the ordinary ends and luxury starts is a matter of degree as judged by consumers. Sekora defines luxury as “anything unneeded” (1977, p. 23), which is set in the context of what society considers necessary and is thus a relative and dynamic term (Berry, 1994). The roots of the word ‘luxury’ derive luxury from ‘luxus’, which according to the Oxford Latin Dictionary (1992) means ‘soft or extravagant living, (over)-indulgence’ and ‘sumptuousness, luxuriousness, opulence’, but the term ‘luxury’ is currently and com- monly used by marketers in most product or service categories to communicate to consumers a particular tier of offer (Dubois et al., 2005) in order to persuade them to ‘trade up’. In addition, new terms are emerging in the practitioner literature such as ‘old luxury’ being about the good itself and defined by the company and ‘new luxury’ being experiential and defined by the consumer (Florin et al., 2007). Marketing academics are using ‘luxury’ in different ways: for example, Vigneron and Johnson (1999) use ‘luxury’ to describe the very top category of prestige brands, whereas Dubois and Czellar (2002) view ‘prestige’ to stem from a unique accomplishment in the brand and ‘luxury’ to merely concern self-indulgence. Economists define luxury goods as goods for which demand rises either in proportion with income or in greater proportion than income (i.e. where the income elasticity of demand is equal to or greater than 1), but clearly the purchase of luxury goods is not governed simply by economic factors (Dubois and Duquesne, 1993), as income is a nec- essary but not sufficient condition to explain purchase. By examining the motivation for consumers to purchase luxury goods within a socio-economic context, Veblen's seminal work (1899, 1994) pro- poses that individuals from the wealthy ‘leisure class’ engage in ‘conspicuous consumption’ when purchasing high priced items in order to ostentatiously communicate wealth and achieve social status (Bagwell and Bernheim, 1996). This viewis consistent with Leibenstein (1950), whose examination of this phenomenon identifies the ‘Veblen’ effect whereby demandfor a goodrises because its price is higher rather than lower, plus two forms of interpersonal effects of conspicuous consumption: the ‘snob’ effect, where the demand for a good falls as the number of buyers increases, since snobs desire to be different and exclusive and therefore disassociate themselves from the masses; and the ‘bandwagon’ effect, where demand for a good increases because consumers follow others in their reference groups who have already bought the good. O'Cass and McEwen (2004) however voice concerns over the interchangeable use in the literature of the terms ‘conspicuous consumption’ and ‘status consumption’. According to them, the former relates tothe desires of consumers togainprestigebypurchasing status- laden products and brands of public or private display, whereas the latter refers to the visual public display or overt usage of products. As a result of Belk's (1988) work on the extended self, which highlights the importance of possessions in contemporary consump- tion and consumers' feelings about them as a key contributor and reflection of their identities, luxury goods researchers (such as Vigneron and Johnson (1999)) recognise that consumers can derive subjective intangible benefits from these goods beyond their functional utility, while additional motivations to purchase them include their higher levels of quality (Garfein, 1989) and authenticity (Beverland, 2006). In Vigneron and Johnson's (1999) review of prestige-seeking con- sumer behavior they separate interpersonal effects on prestige con- sumption from personal effects, and conceptualize five types of perceived value for prestige goods: namely three types of interper- sonal effects (i.e. the Veblen effect for perceived conspicuous value; the snob effect for perceived unique value; and the bandwagon effect for perceived social value) and two types of personal effects (i.e. the hedonic effect for perceived emotional value and the perfectionism effect for perceived quality value). Following further work, they revise this classification by switching around the bandwagon effect to a personal effect and the perfectionism effect to an interpersonal effect (Vigneron and Johnson, 2004). The authors can see arguments for both of these positions, especially in considering the behavior of global consumers. Catry (2003) argues for the possible replacement of actual scarcity, once considered essential to the existence of a luxury good, by the notion of perceived rarity maintained through rare ingredients or components in the short term, or sustainably through strategies of techno-rarity enabled by innovation, limited editions or information based rarity. An alternative approach to conceptualising consumer perceptions of luxury goods from Vickers and Renand (2003) considers luxury goods as symbols of personal and social identity and seems to fulfill calls from Jevons (2007) and Buchanan-Oliver et al. (2008) to take an 1157 C. Tynan et al. / Journal of Business Research 63 (2010) 1156–1163 integrative perspective on brand definition. They propose differenti- ating between luxury and non-luxury goods in terms of the mix of their components on three dimensions: functionalism, experiential- ism and symbolic interactionism. Therefore, the key identifiers of luxury brands adopted in this study are high quality, expensive and non-essential products and services that appear to be rare, exclusive, prestigious, and authentic and offer high levels of symbolic and emotional/hedonic values through customer experiences. In short, evidence of luxury brand definitions from each of the four brand perspectives (i.e. symbolic, functional, psychological, and experien- tial), which Buchanan-Oliver et al. (2008) identify, exists. 4. Co-creation of value Authors such as Payne et al. (2009), Prahalad and Ramaswamy (2004) and Vargo and Lusch (2004) argue that the firm does not create and deliver value to the passive customer, but rather through interaction and dialogue embeds value in the co-creation process between the firm and its active customer. This moves the focus of marketing to a process of co-creating value through the exchange of knowledge and skills with customers and partners (Vargo and Lusch, 2004) to co-construct unique experiences (Prahalad and Ramaswamy, 2004), that is developing a service orientation predicated on processes of joint value creation (Vargo and Lusch 2004, 2008). Nevertheless, the academy does not yet understand the processes of value creation and recent studies overlook the creation of the service experience (Schembri, 2006). Peñaloza and Venkatesh (2006) recommend that researchers should study markets as social con- structions to examine those multiple perspectives of meaning which create value for the customer. These new understandings emphasizing the importance of value co-creation are particularly important for this study of value co- creation in the luxury goods market. While value is a central concept in marketing (Payne and Holt, 2001), Woodruff and Flint (2006) call for the development of a better understanding of customer value. The focus of traditional marketing is the firm-centered notion of value in exchange, that is making a value proposition for the passive customer to accept or decline (Prahalad and Ramaswamy, 2004). Recent studies however, emphasize the co-creation of value by the supplier and the “connected, empowered and active customer” (Prahalad and Ramas- wamy, 2004, p.8), who determines value “uniquely and phenomeno- logically” (Vargo and Lusch, 2008, p. 7) during consumption. Thus, the concept of ‘value-in-use’ supersedes that of value in exchange (Lusch and Vargo, 2006) and suggests the use of marketing approaches, which are experiential, interactive, progressive, evolving and flexible (Tynan and McKechnie, 2009). The customer and the supplier co-create value at “multiple points of interaction” (Prahalad and Ramaswamy, 2004, p. 13) through co- creation experiences which take place throughout the life of the service and not just at the point of exchange. These value-creating interactions can include other members of the customer's and the supplier's network (e.g. members of brand communities, share- holders, or partners of the supplier). Prahalad and Ramaswamy (2004) see the experience being the brand and identify co-creation as taking place and evolving through personalized experiences in which the customer is an active partner. By taking an experience-centric view further, Schmitt (2003) asserts that Experience Marketing can deliver sensory, emotional, cognitive, behavioural and relational value to customers to which Tynan and McKechnie (2009) add social and informational based value. To be successful, Poulsson and Kale (2004) argue that a marketing experience should have personal relevance for the customer, be novel, offer an element of surprise, engender learning and engage the customer. This recognition that the brand does indeed have an experiential component and that the experience of the brand involves an interactive process between the customer, supplier and their networks contributes to understanding of the co- creation of value. 5. The framework development process This current study specifically addresses the gap within the lit- erature on the nature and co-creation of value in the luxury market. Having reviewed the literature on what constitutes a luxury brand, greater attention is now required to understand how customers interact with, and experience, the luxury brand. Smith and Colgate (2007) offer an innovative and useful general theoretical framework of customer value creation, which led to authors to explore the types of value they identify. Their framework includes types of value (i.e. functional/instrumental value, experiential/hedonic value, symbolic/ expressive value, and cost/sacrifice value) plus sources of value (i.e. information, products, interaction, environment, ownership/posses- sion transfer), and as this framework is generic in nature its appli- cation for luxury goods requires further development. Initially, to accommodate the types of value identified by Vigneron and Johnson (1999, 2004) the authors classify Veblen, snob, band- wagon, and perfectionismeffects as symbolic/expressive value, hedonic effects as experiential/hedonic value and perfectionism effects as cost/ sacrifice value. Next, the authors classifythe workof Vickers andRenand (2003) on personal and social symbolic meanings as relating to symbolic/expressive value. However, to extend the framework for this type of value in the luxury context, the authors believe that they should draw a distinction between meanings of an outer- and self-directed nature. Finally, noting that Smith and Colgate (2007) indicate howthey classify Holbrook's (1999) customer value types in the framework, and consultingthe original typology of consumer value (CCV) four particular types emerged as appropriate for the context of this study. Two of them are self-oriented: excellence (quality), which is a utilitarian value, and aesthetics (beauty), a sensory value, which Smith and Colgate (2007) classifyas functional/instrumental valueandexperiential/hedonic value respectively. The remaining two types are other-oriented: status (impression management) which is a desired value; and esteem (possessions) which concerns possession value. Therefore the authors classify the self-oriented types as self-directed types of symbolic/ expressive value and the remaining other-oriented ones as outer- directed types of symbolic/expressive value. Expanding the typology to encompass luxury grounded theoretical sources of value requires the addition of a number of new sources of value including craftsmanship (Kapferer, 1997) as a utilitarian value. The symbolic/expressive category is expanded by incorporating band- wagon, snob and Veblen effects (Leibenstein, 1950), the notion of signs (Kapferer, 1997; Levy, 1957), status or esteem (O'Cass and McEwen, 2004), prestige (Dubois and Czellar 2002), social identity (Vickers and Renand, 2003), uniqueness mentioned by Kapferer (1997) and first explored by Ruvio (2008), and authenticity (Beverland, 2006) in the outer-directed category. Symbolic/expressive additions in the self-directedcategory include self-gift giving behaviors (Tsai 2005; Mick and DeMoss, 1990), nostalgia (Holbrook and Schindler, 2003) plus internally focused aspects of uniqueness (Ruvio 2008; Kapferer, 1997) and authenticity (Beverland, 2006). According to Schmitt (2003) and others (Poulsson and Kale, 2004; Prahalad, 2004; Carù and Cova, 2003; Pine and Gilmore, 1998; Carbone and Haeckel, 1994; Holbrook and Hirschman 1982) consuming the experience adds value in the experiential/hedonic category. In addition to incorporating newsources of value for luxury goods to the framework, the authors incorporate one new type of value which Smith and Colgate (2007) did not consider, which is value offered by the relationship with the brand (Fournier, 1998), the brandcommunity (Veloutsou and Moutinho, 2009; Kozinets, 2002; Cova and Cova, 2001; Muñiz and O' Guinn, 2000) and/or the service provider (Grönroos, 2006), which is particularly important for high value luxury goods where personal service and high expectations are the norm. Finally, the cost/sacrifice category is expanded to 1158 C. Tynan et al. / Journal of Business Research 63 (2010) 1156–1163 encompass exclusivity and rarity (Catry, 2003). Table 1 shows reclassifications and extensions of Smith and Colgate's (2007) original types of value and additions to the theoretical sources in order to providea frameworkfor understandingtypes of valuefor luxurybrands. 6. Methodology The research utilized a multiple case study approach to investigate the nature and co-creation of value in the luxury market. The authors focused on three luxury brands for this study because of the advan- tages of allowing the investigation of a contemporary phenomenon in a real life context where the boundaries between phenomenon and context are not clearly defined (Yin, 1984). They collected data for each of the chosen brands over a fifteen-month period using several methods of data collection including interviews with senior practi- tioners, analysis of official brand websites, a netnography of brand- related blogs, together with a limited number of customer interviews and some retail observations in order to understand the dynamics of value creation in this market. Not only can the resulting data yield useful managerial and consumer insights, but also the uses of netnography (or online ethnography) and other participative approaches to data collection are more appropriate at a time when latest thinking indicates that the nature of customer involvement and engagement with firms and their goods is changing (Bonnemaizon et al., 2007; Peñaloza and Venkatesh, 2006; Vargo and Lusch, 2004; Prahalad, 2004). The choice of the three case companies was guided by a number of criteria including their global iconic status as well known, aspiration- al, luxury, British, heritage brands (in spite of foreign ownership in one case): Brand X is an automotive company, Brand Y is a designer of fashion clothing, and Brand Z is a department store. Gaining access to senior managers proved highly challenging and so the Walpole Group (2007), a UK-based trade association of British luxury brand owners, initially mediated contact. The authors undertook four in-depth interviews with senior prac- titioners, which lasted thirty minutes on average using an open-ended style of questioning. Eight face-to-face interviews with customers of two of the selected brands took place outside flagship stores lasting fifteen minutes on average. The researchers followed these with a retail observation at each store, which consisted of field notes being audio-recorded of their description of the store and multisensory impressions of the retail environment upon entering each store and walking all around it. Given the low footfall at UK-based luxury car showrooms for the remaining brand and the fact that most of its customers live overseas, the authors sent a short postal survey to members of a club of brand enthusiasts instead. Since many luxury brands are now focusing on developing an online presence, the authors considered the examination of official websites for each of the three brands important. They also undertook a netnography in order to explore the attitudes and behavior of online market-oriented communities (Kozinets, 2002; Füller et al., 2007). The advantage of this final form of data collection is that “it provides marketing researchers with a window into naturally occurring be- haviors, such as searches for information by and communal word of mouth between consumers” (Kozinets, 2002, p.62). Thus, the researchers examined both unofficial websites and blogs dedicated to each of the brands and more general websites dedicated to luxury automotive and fashion clothing brands. The netnography was con- ducted in the third and twelfth months of the study period, and its scope is indicated by the number of sources referred to for each brand: Brand X —brand-related websites (47), brand-related blogs (4), luxury car-related websites (6), and luxury car-related blogs (6); Brand Y — brand-related website (1), fashion designer-related websites (7), brand-related blogs (8), fashion-related blogs (8), designer-related blogs (7); Brand Z — brand-related websites (2), brand-related blogs (11), luxury fashion websites (14), and luxury fashion blogs (5). Each interview discussion was audio-recorded and transcribed verbatim. The text was analysed independently by the authors fol- lowing the generalized sequence of steps of data reduction and transformation, data display and conclusion drawing/verification (Miles and Huberman, 1994, p. 10), which was then discussed, ini- tially on a within-case basis and then on a between-case basis. Using a similar process for analysis of the online material, the authors approached the data from a holistic perspective and undertook data triangulation to improve the internal validity of the work. By em- ploying what can best be described as ‘dialectical tacking’ (Geertz, 2003) the authors continually referred back and forth between the literature review and the data gathered through the various multiple methods, to enable us to incrementally generate deeper under- standings of the nature of value and its co-creation for luxury goods. 7. Findings and discussion This article now presents and discusses the findings below according to the emergent themes with some exemplar quotations provided. 7.1. Types of value delivered and sought Customers identified a wide range of values that they sought in luxury goods and highlighted how the brand delivered value. They considered money no object due to their status as ultra high or high Table 1 Customer value framework for luxury goods. Source: Developed from Smith and Colgate (2007). Types of value Theoretical sources Utilitarian Excellence (Holbrook, 1999), craftsmanship (Kapferer, 1997) Symbolic/expressive Outer-directed Conspicuous consumption (Veblen 1899); bandwagon, snob and Veblen effects (Leibenstein, 1950; Vigneron and Johnson, 1999); perfectionism effect (Vigneron and Johnson, 2004); signs (Levy 1957; Kapferer, 1997); status/esteem (Holbrook, 1999; O'Cass and McEwen, 2004); prestige (Dubois and Czellar 2002); social identity (Vickers and Renand, 2003); uniqueness (Ruvio 2008; Kapferer, 1997); authenticity (Beverland 2006). Self-directed Bandwagon effect (Vigneron and Johnson, 2004); personal identity (Vickers and Renand, 2003); aesthetics (Holbrook, 1999); self-gift giving (Mick and DeMoss 1990; Tsai, 2005); uniqueness Ruvio, 2008; nostalgia (Holbrook and Schindler 2003); authenticity (Beverland 2006). Experiential/hedonic Hedonic effect (Hirschman and Holbrook, 1982; Vigneron and Johnson 1999); aesthetics (Holbrook, 1999); the experience (Holbrook and Hirschman, 1982; Carbone and Haeckel, 1994; Pine and Gilmore, 1998; Schmitt 2003; Poulsson and Kale, 2004; Prahalad and Ramaswamy, 2004; Prahalad, 2004: Carù and Cova, 2003). Relational Consumer–brand relationships (Fournier, 1998; Grönroos, 2006; Veloutsou and Moutinho, 2009); brand community (Kozinets, 2002; Cova and Cova, 2001; Muñiz and O' Guinn, 2000). Cost/sacrifice Perfectionism effect (Vigneron and Johnson, 1999); exclusivity (Catry, 2003); Rarity (Catry, 2003). 1159 C. Tynan et al. / Journal of Business Research 63 (2010) 1156–1163 net worth individuals. The cost/sacrifice value category associated with the perfectionism effect (Vigneron and Johnson, 1999) and notions of exclusivity and rarity (Catry, 2003) appear to be irrelevant to them. Money is a necessary but not a sufficient condition for the purchase of luxury goods. According to one Marketing Director, his customers are not interested in an invitation to come and drink champagne as they can afford to have all that they wished and their time is precious, but they do value something exclusive and tailored for them. The utilitarian value sources of excellence (Holbrook, 1999), quality and craftsmanship (Kapferer, 1997) are assumed and taken for granted although still acknowledged as being valuable. Our customer is someone who has significant amount of money and someone who enjoys fine things. We have... some of our owners are car collectors and they just love cars and they respect the Brand X for what it is in terms of craftsmanship and engineering. And we have customers who buy for what the brand stands for, the history and heritage and the customers who buy it because it's just the best car in the world. (Marketing Director, Brand X) Using both contemporary and traditional patterns, Brand Z product is known for beauty, luxury and uniqueness. (Brand Users' website, Brand Z) For me, the last thing I am concerned with is how much it is because at the end of the day I'm paying for quality and that's what luxury is about. (Brand Y customer, male aged 33) Symbolic/expressive (e.g. Vigneron and Johnson, 1999, 2004), experiential/hedonic (e.g. Hirschman and Holbrook, 1982; Holbrook and Hirschman 1982; Schmitt, 2003) and relational sources of value (Fournier, 1998; Grönroos, 2006) were all raised by informants, who also provided evidence of the signs and symbols associated with the luxury brands triggering pleasant and creative thoughts. Aesthetics (Holbrook, 1999) are important to luxury goods customers and recognised by practitioners, as is authenticity (Beverland, 2006) with associated artefacts guaranteed through a combination of provenance, certification, limited production and signed items. So much effort is put into the design and manufacturing of the cars that driving a Brand X, smelling the leather, sitting in the seat, is equivalent to the pleasure of drinking champagne, eating caviar, and having a back massage, all at the same time! (Member of Enthusiasts' Club, Brand X) Luxury brand means quality, originality, sense of scarcity. (Marketing Manager, Brand Z) Whenever I see his signature on product or paper bag, I feel naturally connected to the brand itself. I am always mesmerized by his artistic sophistication and creativity. I also feel lovable when I wear his suit. (Blog: Carrie, Brand Y) Customers discuss luxury goods in rich hedonic language describing them as “opulent”, “pleasing to the touch and eye” and designed to “indulge and delight”. Fashion bloggers conveyed their delight in wearing designer branded clothing, which evokes status (O'Cass and McEwen, 2004) or prestige (Dubois and Czellar, 2002), or helps them express their uniqueness (Ruvio, 2008). All of these examples are of value brought about during the customer's use of the luxury brand rather than at the point of purchase. 7.2. Processes of co-creating value The networked nature of value co-creation was in evidence (Achrol and Kotler, 2006) through a wide variety of interactions. For the companies the constellation of individuals in these value-creating networks is of high status and includes unofficial and official brand communities, experts including the curator of a national museum, designers across a range of fields (e.g. fabric, transportation and elec- tronics); symbols of popular culture (namely an iconic 1960's fashion model, a renowned musician, a photographer, a graphic artist), as well as editors and journalists. According to Bastien and Kapferer (2009) contemporary art is a source of inspiration for luxury brand designers and helps to enable brand owners to maintain topicality and relevance for their brands. Clearly seeking out fresh and varied collaborations within the worlds of art, music and fashionsuchas promoting a number of up and coming designers, serves as a means of enhancing the overall value of the brands we examined. By comparison, the customer net- works include official and unofficial brand communities and social networking sites. ..Brand Y has the ability to anticipate, and even spark off trends not only fashion but in the wider context of popular culture. (Fashionista Website) In the luxury market interactions are multilayered and complex, and not simply comprising interaction between the firm and the customer. In addition, they regularly include interactions with other luxury brand owners, the informed and partisan brand community, opinion leaders, and the owners, employees and customers of other non-competing luxury brands (e.g. luxury watch, yacht and car manufacturers engaged in joint events). The customers favor inter- action with high status individuals as this offers them privileged access to information. In the case of Brand X, this relates to contact with the Company Designer and an opportunity to tap into knowledge or discuss new ideas and developments in a sector that is of great personal interest to them. As for Brand Z, customers highly appreciate introductions made to new ‘cutting edge’ designers in the art world rather than designers from the company, since they can possibly use them to enhance their social capital amongst members of their peer group. Of the three companies, Brand Y creates value the most widely through public and private events including exhibitions, book and album launches, dinner parties, previews and limited edition releases. Clearly, co-creation of value requires customer awareness of these events and interest in participating in them. Much evidence indicated that customers of Brand X were the most involved in creating events for themselves through enthusiasts' international, national and regional events and meetings. It is all about providing the customer with an experience. Customers no longer define themselves by what they own or what they buy because their wealth means they can acquire almost any assets but they define (themselves) more by experiences, whether it's a trip to South Pole or it's a balloon flying over the Andes or it's to talk to the designer of the Brand X. (Marketing Director, Brand X) It is noteworthy that not only is the experience about facilitating interactionbetweencustomers and the company andits employees, but also the experience concerns interactions and experiences shared with complementary and similarly positioned brands, and experiences with other members of the elite. So in terms of the developing service orientation predicated on processes of joint value creation (Vargo and Lusch 2004, 2008) a network becomes important for luxury brand owners inoffering opportunities for co-creatingvalue withother brands in the network and other members of the brand community through satisfying and tailoring brand experiences based on interactions with brand staff, customers and their counterparts. In terms of co-creating service, the multiple interactions between network members serve as a basis upon which luxury brand owners can develop differentiated, desired and difficult to copy aspects of their brand experience. Our customers are …very interested in who the other customers are. They are quite competitive people…and I think they're quite interested in meeting their peers. We make these interactions possible through our private events, and I think that's the primary 1160 C. Tynan et al. / Journal of Business Research 63 (2010) 1156–1163 reason why they enjoy getting together because they get to know other customers. (Brand Manager, Brand X) ... I think that when they buy into luxury they try to buy something that makes them feel special or is special…it's almost like buying into a club, you feel part of something that is exclusive, that is beautiful quality, taking time to design, that is thought about. (Marketing Director, Brand Y) All the marketers spoke of listening to their luxury goods cus- tomers. They also keep up a constant stream of communication, both on- and offline, including blogs to provide information and new ideas for their customers in real time. Celebrity endorsement through be- spoke clothing for an Oscar winning actor and members of a premier football team kept Brand Y in the news. Many customers will come to (plant) to determine the final specifica- tions of their car, and many will also come and see it during the manufacturing process. So it is very much part of our strategy to deliver anexperience ona long termbasis…and also it would be fair to say that it is something that our customers will demand fromus…they want that degree of involvement. (Marketing Director, Brand X) Only Brand X demonstrates a sophisticated understanding of the processes and benefits of engaging in a dialogue with customers. They focus on offering specifically what the customer wants, and listens and responds to customers effectively in order to co-create the desired experience. By comparison, the other brands communicate with their customers more indirectly through opinion leaders, the media and staged events, which indicates that the two-way processes that lead to co-created brand experiences and the co-creation of value are not yet in place. We try to create a one-to-one basis in stores so it will be up to each store manager to develop their own customer base and work closely with regular customers to build up regular relationships. So each shop has its own data base and has to look after it. Mainly, customers will receive invitations for previews or maybe Christmas shopping evenings just for those customers, so we try to make themfeel special. We don't do a loyalty card, but who knows, possibly in the future, as technology becomes more and more relevant. (Marketing Director, Brand Y) We have a quite strong press team who are looking for editorial, coverage and product placements in the right target publications. We also conduct web or online communications, so e-communication, and we have a big email database, and we also contact loyalty cards regularly to inform them about new things happening in-store. (Marketing Manager, Brand Z) The overall luxury brand experience offers an important way of enhancing perceptions of each of the five types of value proposed earlier in Table 1. The participants reported a broad range of person- alized experiences including private and select dinner parties to meet senior managers and influential individuals in the field, a bespoke grooming service, a private book launch, and the opportunity to join an exclusive members' club. Facilitating and participating in such experiences with the customer is the process by which so much value creation takes place (Schmitt, 2003). For the case study companies these experiences offer an oppor- tunity for some unscripted interactions between the brand staff and customers in order to gather information, tailor the experience to the individual or refresh its format. For the marketers they offer benefits for the luxury good consumer that literally money cannot buy, which enhances brand exclusivity (Catry, 2003) and prestige (Dubois and Czellar, 2002). For these reasons, the automotive plant and flagship store and outlets for the case study brands represent unique venues and destinations in themselves: designed to facilitate a special expe- rience for the luxury customer and staffed with well-trained and informed employees keen to assist customers rather than push them into a purchase. I also like the assistants in Brand Y, they're very courteous and they don't push anything onto me. They don't seem to be there to sell but to advise. (Brand Y customer, male aged 32) The store is beautifully laid out and just a wonderful experience. This is a store I couldn't live without. (Blog: Streetwise, Brand Z) 8. Conclusions and implications This exploratory study examined how marketers and consumers can co-create value in the luxury goods marketplace. So far, much of the traditional marketing literature, plus that in this setting, takes a managerial perspective and neglects to take into account the consumer perspective. Examining this marketplace as a social construction offers deeper insights into the nature and sources of value both in exchange and use (Peñaloza and Venkatesh, 2006). The researchers have developed a theoretical framework of types of value for luxury brands, and have used case study research to explore the many types of value which customers seek and receive from luxury brands. While a high standard of utilitarian value is assumed as essential for all luxury goods and cost/sacrifice based value appears to be irrelevant to customers; the symbolic/expressive, experiential/hedonic and relational types of value are the ones which enable differentiation between various luxury brands. As Table 1 illustrates, the nature of these particular types of value is varied. This study identifies processes of value co-creation by firms and customers. Co-creating the luxury brand experience involves dialogue and complex interactions between the brand owner, employee, customer and other social groups including the customer brand communities, those experts or agencies who are part of the brand owners' network and the industry itself. The experience only creates value when the parties engage and market with each other, that is, when no separation between production and consumption occurs, which traditionally serves to divide the parties. Without a doubt the interactive and networked nature of value creation is hugely important, cutting across art systems, fashion systems, design systems and integrated marketing communications systems which mediate between the culturally constituted world and the consumer good (Arnould et al., 2004) and also accommodates the latest develop- ments in technology and innovation. So brand owners must establish, develop and refresh their networks in order to access new ideas and expertise, which will enable them to innovate continually in a highly competitive marketplace and stay at the cutting edge. Brand owners do not just offer value rather they co-create value with inputs and influence fromcustomers and other parties to achieve value sought in terms of exclusivity, recognition, access to privileged information and prestige. The findings indicate that the substantial interplay amongst non-competing but complementary luxury brand networks co-creates value. Interactions with high status individuals have become a crucial differentiator and source of value for each of the case brands. A huge range of public and private events was identified, which were not necessarily brand owner-led or even controlled by them. Certainly, the netnography revealed that the brandscapes are rich and varied involving partners whom the brand sponsors but also those who are completely independent of the brand. This conclusion suggests that practitioners should monitor all channels of brand- related communications (i.e. official and unofficial), so that they can respond to them flexibly and interactively. Many opportunities exist to engage customers usefully in dialogue instead of opting for an extensive array of one-way communication. However, luxury brand owners should also recognise that customers want different levels of engagement with their brands ranging from minimal to highly involved. Co-creating value for each of the case brands requires 1161 C. Tynan et al. / Journal of Business Research 63 (2010) 1156–1163 skilful and well-trained staff, who can successfully engage through multiple channels in an appropriate dialogue with the ultra high and high net worth individuals who constitute much of the market for luxury products. Venues are also important, with each of the brands having iconic destination outlets of high prestige and design content, which add value for their customers. Whether changes in the customer base for luxury goods generally or the emergence of the online marketplace will change this need materially, remains to be seen. 9. Limitations and future work The findings reported from this exploratory study are limited to three case studies in one country and so may not be generalizable to all luxury brands. Therefore, further research jointly examining value co-creation fromboth a practitioner and consumer perspective should consider a broader selection of luxury brands. The global nature of this marketplace and the increasing importance of luxury goods in China, India and Russia suggest that further research in other countries, particularly in collectivist cultures, is needed as is work on the issue of the disposal of luxury goods. While the service-oriented, customer-focused approach has provid- ed a fruitful lens to aid the conceptualization process in this study, the emergent status of this work makes this approach challenging to work with, particularly due to its continual evolution in language and substance throughout the fifteen months of the study. Acknowledgement The authors wish to thank the editors and anonymous reviewers for their helpful and considered comments on this paper, as well as acknowledging the financial support provided by a bursary from the Worshipful Company of Marketors and the assistance of the Walpole Group in gaining access to senior managers for this study. References Achrol Ravi S, Kotler Philip. 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