Luxury Consumer Behavior: Final Exam (Individual Assignment)

Professor Shashi Matta

Exam Upload Deadline on BoostCamp: 18:00 h on Friday, March 31, 2023

Please read the following instructions carefully before you start:

1. This Final Take-Home Assignment consists of FOUR (4) application-based

cases and related questions on the concepts learned in the course. You are
required to answer all 4 case questions.

2. The deadline to upload your answer document on BoostCamp is 18:00 h on

Friday, March 31, 20233.

3. Late submissions will not be graded.

4. Only Microsoft Word documents are allowed for your answer document.
PDF Documents (or documents in any other format other than Microsoft
Word) will not be graded.

5. Please save your file with the following file name format: LAST NAME_First
Name.docx. (for example, MATTA_Shashi.docx)

6. Please use the following formatting guidelines for your answer document
and do not deviate from these guidelines –

- Margins of 2.5 cm on all sides

- All written content (except for tables, figures, images if any) should be
typed in Times New Roman font, size 12 point, single spaced.

7. The maximum page limit (including title page, tables, references,

everything included) is 6 (six) pages, single spaced.
 Application Case # 1: The Rise of Branded Luxury Extensions

Source: Luxe Digital

Over the years, personal goods luxury brands have been extending their portfolio,
from activewear to beauty to homeware and even hotels (i.e, Armani Hotels and
The Palazzo Versace Luxury Hotels and Resorts), with various degrees of success.
Lux Digital’s latest report predicts that we will see brands expanding even further.

In 2022 alone, Ralph Lauren opened several Ralph’s Coffees and, more notably,
Aisa Pacific’s first Ralph’s Bar in China’s Tier 1 city Chengdu. Maison Margiela
unveiled its first café in Chengdu, and then in South Korea. Dior opened its
restaurant, Monsieur Dior, in its Avenue Montaigne store in Paris. And Louis
Vuitton opened The Hall, its first standalone restaurant in the world, in Chengdu.
The LVMH-owned Luxury Maison is also set to open its world’s first dedicated
furniture and homewares store in Shanghai.

For this case question, consider the following five (5) luxury brand extensions – i)
Ralph’s Coffee, ii) Maison Margiela Café, iii) Monsieur Dior Restaurant, iv) Louis
Vuitton’s The Hall restaurant, and, v) LVMH’s Luxury Maison Furniture and
Homewares.

Case Question 1: To answer this question, please use consumer psychology

research insights from three sources – i) “Three Types of Social Influence,” ii) our
class lecture learning and discussion on “Individual Differences in Consumer
Psychology,” and iii) our class lecture and learning on “Heuristics and Biases” to
indicate possible underlying mechanisms and reasons as to why each of 5 these
extensions could be successful, and why each of they may fail. Hence, for each of
these 5 brand extensions, mention one reason why the brand extension might
succeed (based on specific research insights or class learnings) AND one reason
why the brand extension might fail (based on specific research insights or class
learnings). Please state the specific research insight(s) you are using for each of
these 5 brand extensions, and do not use the same insight for more than one
extension. (10 Points)
 Application Case # 2: Butler Robots for Luxury Consumers in Three
Different Countries

Sources: keymakr.com, endgadget.com

While robots have been used by the hospitality industry for a few years now, the
conversation in the last two years has shifted to personal, home Butler Robots
aimed at luxury consumers to accomplish a variety of simple, but important,
tasks. These devices aim to sell convenience and safety to the home Butler
market, powered by Artificial Intelligence (AI).

Asia has taken the lead on unveiling personal, home Butler Robots at Consumer
Electronics shows worldwide. A relatively new venture from Japan,
PersonalRoboButler (PRB) has attracted funding from the world’s top-most
venture capitalists who’re betting on a successful launch targeting luxury
consumers in 2024. The company behind PRB promises the following benefits, and
will add many more, given the rapid rise of AI technology -

• Navigation: The main advantage of robot butlers over static virtual

assistant systems is their ability to move safely around the home. Robot
butlers can construct a virtual map of a living space and move around it to
complete assigned tasks.

• Delivering objects: Robots can be used to deliver small objects from one
part of the house to another. For example, this might include drinks and
food, tools, or electronic devices. This capability may be useful for luxury
homes with multiple family members.

• Keeping an eye on vulnerable family members: Butler robots can help

families care for elderly or otherwise vulnerable individuals. Users can
instruct these devices to check on family members using on board cameras.

• Checking on appliances: Thinking that you might have left the stove on or
an iron plugged in can cause stress and anxiety. Butler robots can remedy
 this by using extendable cameras to check the status of appliances. Above
all, this functionality makes homes and people safer.

• Personal assistant for childcare: Butler robots can help families care for
their children. Users can choose from a variety of childcare tasks including
tutoring, entertainment, delivering food, and child safety.

Case Question 2: Assume that you are a consumer insights consultant for PRB.
Your task as a consumer insights consultant for PRB is to help develop three (3)
different communication campaign strategies for PRB targeted to Luxury
consumers. Each campaign should target luxury consumers in a different country.
Please pick three (3) specific countries and tailor one campaign idea to each of
the three countries. To answer this question and in developing these 3 different
campaigns, please use consumer psychology research insights from two research
sources - “Three Sources of Motivation,” and “Cross Cultural Consumer Behavior.”
Please state the specific research insight(s) from these two sources for each of 3
campaign ideas. (15 Points)
 Application Case # 3: Luxury Solar Yachts from Sunreef Yachts Eco

Sources: grandviewresearch.com, boatsandoutboards.co.uk, YachtWorld 2022

report

The global yacht market size was valued at USD 8.91 billion in 2022 and is
expected to expand at a compound annual growth rate (CAGR) of 5.8% from 2023
to 2030. The demand for yachts has gradually increased in the last few years,
owing to the increase in disposable income of individuals and their inclination
toward leisure or recreational activities.

The market is expected to witness significant growth in Europe during the

forecast period. The growing number of High-Net-Worth Individuals (HNWI) and
the adoption of technologically advanced yachts are the primary factors driving
the regional sales growth of new yachts. High-tech interiors and luxurious
amenities provided by the European OEM manufacturers are also predicted to
drive the demand for the yacht industry. The OEM manufacturers have been
observed to be continuously investing in R&D activities to offer a unique
experience when traveling with onboard luxury accommodation.

The super yacht segment dominated the market with a revenue share of more
than 31% in 2022. The high share of this segment can be attributed to the high
popularity of these yachts among the end-users. Sport yacht is expected to
emerge as a fast-growing segment in the market. This can be attributed to the
high demand for sports yachts in countries such as China and France.

The idea of owning a boat has clearly piqued the interest of a younger target
market. According to YachtWorld’s 2022 research, the share of Gen Z shoppers
aged 18-24 visiting the YachtWorld marketplace since 2019 increased by a
staggering 64%. In 2019, this group accounted for 2% of all people contacting boat
sellers, whereas in 2022, it was 7%. Millennials too displayed more interest than
ever in buying a boat. The share of the 35-44 age group saw a prominent increase,
representing 17.6% of all visits in 2019 and 22.3% in 2022 – an increase of 21%.
What’s more, the share of younger millennials, aged 25-34, increased from 12.6%
in 2019 to 13.6% in 2022. This is an increase of 7%. In terms of total visits to the
marketplace, the 45-54 age group still take the top spot. But for the first time, the
second-largest group consists of younger (35-44), rather than older visitors. While
boat buyers aged 45 and over still represent a strong majority of YachtWorld’s
total visits at 57%, it is clearly time for the industry to react accordingly.

Sustainable Luxury Yachts? Equipped with the world’s first and only composite-
integrated solar panel system and using the industry’s lightest batteries, the
Sunreef Yachts Eco line of luxury yachts offer the best of autonomy and energy
efficiency for environmentally-conscious luxury cruising. The Sunreef Yachts Eco
harvest power from the sun more efficiently than most solar catamarans. First in
the world In-house patented, designed and manufactured by the shipyard, Sunreef
Yachts’ solar panels are fully-integrated with the composite bodywork, vastly
increasing the amount of solar power generated.

Case Question 3: Provide three (3) distinct examples of how you would apply
consumer psychology research insights from “Sustainable Consumer Behavior,” to
craft specific messages or promotions to influence luxury consumers to purchase
a Sunreef Yacht Eco. You can use insights from any of the following research
streams - a) cognitive barriers, b) the self, c) social influence, and d) product
characteristics. Each of the 3 examples should be based on a distinct insight.
Please state the research insight, followed by the specific message or promotion,
for each of the 3 examples. (15 Points)
 Application Case # 4: Consumer Attitudes in the Luxury TV Market

Market Research International (MRI) conducted a brand and customer attitude

study in the Luxury TV category. Presented below is some of the data collected in
this study, for one particular segment of consumers in the market, “TV
Frequenters.” This is a segment of Luxury consumers that want to create a
Theater-like experience in their homes. Most TV Frequenters favored 8K OLED
luxury TV models and had the following four brands of high-end TVs in their
consideration set – Cony, Pfundig, Panoramic and Fillip. Further, they considered
the following four attributes as being important – image quality, low price, sleek
looks, and interior décor integration.

In this MRI study, consumers in the TV frequenters segment first attached

weights to the four attributes (denoting their importance), and then rated each of
the brands on their performance on the four important attributes.

The following table indicates the weights that TV Frequenters place on each of
the four attributes (4, 3, 2 and 1 respectively, indicated in parentheses next to the
attribute), and the belief ratings of the performance of the four brands on each of
the four attributes (1 = least favorable, 9 = most favorable). For example, from the
table below, “Image Quality” is the most important attribute that TV Frequenters
identified (weighted 4), and their belief is that Cony has the best image quality of
all four brands (belief rating of 8 on the 9-point scale).

Belief Ratings for the Brands

Cony Pfundig Panoramic Fillip

Feature / Attribute

Image Quality (Weight: 4) 8 6 7 7

Low Price (Weight: 3) 3 8 4 6
Sleek Looks (Weight: 2) 7 5 7 6
Interior Décor integration (Weight: 1) 8 7 9 4
Q 4A. Applying the Expectancy Value Model (also referred to as the Multi-
attribute Attitude Model), calculate TV Frequenters’ attitude towards each of
these brands. Please indicate the results of the Attitude Function (numerical
value), and highlight the brand that would be the choice of this segment, if they
followed this model? (3 Points)

Q 4B. Consider a brand that is the second best choice, and suggest at least four
different ways in which this specific brand can influence or change this segment’s
attitudes so as to be viewed more favorably. Be specific in your responses, in
terms of relating attitude change strategies to the details (brands, features /
attributes) in this case. Merely repeating material from class slides will not earn
you any points. (4 Points)

Q 4C. What would be the brand of choice if consumers used - (3 Points)

(i) the conjunctive heuristic with an acceptable cut-off level of 5 for each
of the four attributes
(ii) the lexicographic heuristic
(iii) the elimination-by-aspects heuristic with an acceptable cut-off level of 7
for image quality, 4 for low price, 6 for sleek looks, and 6 for interior
décor integration.