The impact of negative reports on luxury brands. Research Paper

IMPACT OF NEGATIVE REPORT IN LUXURY BRANDS
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Research Background
According to a report filed by Bain & Co consultants, the global market of the luxurious good is worth about 200 billion dollars and characterized by a 4% increase annually. The luxury market is controlled by magnificent companies such as LVHM, PPR, and Richemont. The consumer’s behaviors towards luxurious commodities are highly sensitive such that maligning reviews and reports are likely to affect their demand negatively. In addition, the fact that luxurious commodities have abnormal demand curve, the changes in socioeconomic and demographic factors might affect their performance in the market in terms of sales. Negative reports also referred to as negative chatter is known to affect the performance of many luxurious brands. Between 67% and 74% of the influence of adverse rants tend to affect one or more commodity in the luxury industry (Åvall, 2017). The effect poses serious implications to a company’s revenue collection. A significance increase in adverse alarms over a particular brand is likely to lead to massive losses in sales revenue. Damaging reports affect external brands and models when these brands are leading in the market, originate from the same country or share the same nameplate (Åvall, 2017). The negative chatters are bad for luxurious commodities because they are costly and their acquisition is attached with a sense of prestige. Therefore, a slight damage to the reputation of a luxury commodity will affect its demand, since potential consumers’ will be unwilling to risk their money and prestige by spending on such a brand.
Introduction
The negative reports serve as real inhibitors to the growth of the luxury industry. Any bad publicity and bad image distort the brand loyalty and damages brand equity at the same time. In addition, negative chatter hampers competition among brand owners, since the companies with the bad image will be shunned by customers. The luxury industry has been a prime target of negative reports because of high preference and popularity with consumers. Luxury companies tend to invest heavily in their brands with the primary aim of boosting their exclusive brand image and prestige of their products. After creating a strong brand, owners limit the accessibility of these products to enhance their luxuriousness. The source of negative reports sometimes comes unscrupulous rivals and concerned customers raising complaints towards a particular brand. Customers are more likely to write negative reviews about a bad experience with a particular brand. Such reviews have a powerful impact since a good portion of potential customers tends to rely on previous costumers’ reviews to make their purchasing decision. Previous research on this topic indicates that if one bad report pops up either in a review site, mainstream media or social media, it will discourage about 22% of new potential customers, and the number is likely to escalate when more bad reports are shown. In addition, some of the negative reports paint the luxurious products as counterfeit, and its It is clear that counterfeiting is a significant source of trouble in the luxury industry.
Motivational and Rationale of the Study
Luxury products are highly sensitive to negative reputation because of the huge price and prestige associated with them. The companies in the apparel. Jewelry, hospitality, real estate and automobile industries deal with a lot of luxury goods and therefore faced with the increasing danger of negative reports. As aforementioned, bad reports may suggest the luxury products are counterfeit. The fear of counterfeit is a major concern in the industry, and consumers always want to purchase genuine luxury brands. Consumer perception of luxury brands influences their buying behavior in the trade-off between the counterfeit and authentic products. Companies in the luxury sector suffer huge losses as result negative reports. Essentially, negative chatters affect sales, since potential customers are likely to shun away in the belief that the products are not genuine as they thought. Reports and reviews on products are designed for customer referrals, and therefore bad image on a product will discourage new customers.
When purchasing luxury products. Consumers asses the brand of the commodity more than the actual features of the products even in cases where the features are embedded in the values of the product. For these reasons, the luxury brand segment has become highly vulnerable to the effects of bad reports since many consumers purchase them due to their high superior quality. The impacts of negative reports are extreme to luxury products because of their limited distribution, and high prices which limit the number of potential buyers. Losing the few flamboyant customers can be disastrous to these companies.
Research Aims and Objectives.
The primary aim of the study is to investigate the impact of negative reports and reviews on luxury brands in terms of sales and the general image of the company. The study will place much focus on the negatives effects caused by bad reports on luxury brands. The discussion is based on individual and social objects of consumption rounds out consumer behavior studies, by virtue of a search for the correlation between customer reactions and product negative image. Therefore, the research problems center on the effects of the bad image on customer’s buying behavior of luxury brands, in terms of the consumption experience
Consequently, the objective of the study is:
1 To assess the impact of negative reports on the demand for luxury brands
2 To examine the impact of negative reports on the image a company dealing with luxury goods.
3 To determine the causes and origin of negative reports in the luxury brand industry.
4 To create knowledge of negative reviews affect the consumer perception of luxury brands.
Structure of the Research
The remainder of the paper is arranged as follows. The first section explores the theoretical background and reviews on how negative reviews on luxury brands, and their effects on both the existing and potential customer to validate the objective of the study. The paper will highlight the research gaps, and introduce the research questions and the hypothesis of the study. The succeeding chapters present the part of the research methodology used in the study. Next, the data analysis part, followed by finding and discussion.
Literature Review
Negative reports on products majorly come from consumer reviews, and partly from rivals. Consumer reviews maybe channeled through mainstream media, newspapers, blogs, and social media sites Facebook, Twitter, Pinterest, and Instagram. The customers’ negative chatters televised posted or shared through these mediums spread fast to other other consumers and potential customers. The emergent of digital marketing has shifted the power of brand control from many businesses towards the consumer, and the luxury brands have been on the receiving end due to the sensitivity of their product and services. Therefore, the special issue of the literature review includes a selection of sources on luxury brands and bad publicity on these products and services. Reflecting the diversity of scholars provides a wide insight into the objective of the study.
The first work by Decker and Trusov (2010), examines the general behaviors of consumers when planning to purchase a luxurious product. According to the authors, potential customers have a habit of carrying out significant background research about a particular product before making the decision to purchase. Today, researching a luxury brand is made easy by the availability of valuable information shared on social media and another online database such as Google. In other words, online reviews posted by consumers and other relevant stakeholders have turned out to be a major source of information for potential consumers and salespersons concerning product quality. The information can be noble or bad, but the later negatively affect the decision making of the potential clients. The author assertion is that since potential customers heavily rely on recommendation and referrals from an actual consumer instead of the company’s advice since the money involved in luxurious products and services are high. Although, some of the negative reviews can be malicious and incorrect many of the adverse sentiments are frank because several other reports come from the real consumers. In addition, the social media platforms allow consumers to report anonymously, and these also enhance honesty as consumers are prevented consumers from facing possible social consequences. The rise of complaints about products from unsatisfied consumers has escalated after the introduction of the social network. Since information about consumers’ dissatisfaction has become easier to access, business is always on the danger of facing substantial damage to the brands. For these reasons, companies have responded with reactive and proactive strategies, where they appoint teams to monitor and address cases of negative reviews emanating from social media and other sites with the aim of minimizing the frequency and impacts. Through the book, the authors elucidate in detail how negative reports influence consumers’ behaviors on all stages of their decision-making procedure together with brand assessment, brand choice, buying behavior and brand loyalty.
Another article by Shin, et al (2013), covers an aspect of how positive and negative e-sentiments influence the market performance of high-tech products. According to the authors, negative reports shared online have a stronger impact on products performance than the positive e-sentiments. Both negative and positive sentiments about luxury goods and services are moderated by customers’ level of expectations. Negative online reviews have proven to impact more adverse effects on expensive commodities compared to low –priced products. The reason is that the high-priced commodities are highly sensitive to negative reports as consumers are always skeptical when purchasing such products. No consumer is ready to spend on luxury goods that are receiving negative reviews online. Luxury goods have higher demand when their prices are high and lower demand when their prices are low. In this regard, a luxury brand can face a significant drop in demand in spite of their huge princes because of its bad image in the market.
Zhang, Zhao, Cheung, and Lee (2014), focused their study on the impacts of negative reports filed at an individual level. The findings revealed that customers examined the contents of the review sites to develop their perception towards the intended products and services. In a case study on the luxury watch brand company, Patek Phillipe, the company reported that 85% of consumers would visit and examine the content of previous customers’ review from their website before to review their informative and persuasiveness. Many companies have included sites where customers can leave a comment about their past experience with the products or services they purchased. Informative reviews serve as valuable additional information that helps potential customers to assess the degree of certainty to determine their purchasing decision. Essentially, potential customers visit a various review site and rank them based on reliability and accuracy and denote o heuristic cues to enhance their decision making. When the review is negatives, customers purchase intention will subside and vice versa. The authors hold that not all negative reports posted or published on Medias and websites are not credible because of their anonymity. However, it is immaterial as to whether the reviews are authentic or into as the impact posted will remain unchanged. Rival companies also employ devious strategy by inserting defaming reports in their competitors’ review sites or even publish it in blogs and newspapers to manipulate the decision of potential customers. In addition, the author concludes that potential customers take negative reports with more seriousness than positive ones and that negative reviews cause higher reduction of purchase compared to the upshot of positive sentiments on aggregating the amount of purchase on luxury goods.
Another paper by Gensler (2014), explores the emotional aspects and motivational surrounding the reaction towards luxury goods associated with negative reviews in contrast to products with positive reviews. The paper pinned their study with an experiment carried out on eight focus group to the relationship between emotional reactions on luxury products. The findings revealed that both previous and potential customers feel the value and prestige luxury products has depreciated once they are implicated by the negative reports. The brand is attached with positive feelings such as pride and sense of accomplishment as well offering the buyer with happiness and love. In other words, customers appreciate the superfluity and the aesthetic value in luxury brands. Therefore, commodities with negative chatters are associated with mixed emotions and demotivation. In addition, counterfeits products have contributed to the account of negative chatters on luxury products. As a result, many customers tend to prepare carefully and in advance to avoid the possibility of purchasing an unauthentic product. The emotion and motivation associated with purchasing counterfeit products trigger the feeling of snubbing and reluctance in purchasing luxury goods and services, and these appeals to the customers’ sense of being smart consumers to benefit from the positives emotions that these genuine goods and services convey.
Definition of Particular Terms
Luxury brands: Refers to commodities that categorized as upmarket goods and their demand increases with the corresponding increase in price.
Negative Reports: Refers to comments or opinions expressing denial and dissatisfaction towards particular products and services based on their quality
Counterfeit: Refers to products that are designed in exact imitation of another authentic and valuable commodity with the aim of deceiving and defrauding consumers.
Research Gaps, Research Question, and Hypothesis
Numerous s...