Can Michael Kors Keep Versace Fans Happy?

SMITH BRAIN TRUST – Buyers of luxury fashion can be passionate, even territorial, about the brands they shell out for.

That’s part of the reason why the announcement this week that Michael Kors had reached a deal to buy Versace for $2.1 billion sparked an uproar across social media, Maryland Smith’s Yajin Wang explains.

Wang has long studied the way consumers interact with high-end designers labels, how those fashions affect the way their users shop and behave. For consumers of luxury designer label, she says, exclusivity is a central part of the allure. And the attachment they feel runs deep. 

Versace devotees have been fretting that the Kors acquisition might diminish the label’s exclusivity. Michael Kors, in addition to its elite line of clothes and accessories, makes a more-affordable fashion line whose products are accessible to a wider audience, and even appear frequently on the racks at discount stores. Would Versace’s label soon be displayed alongside Jessica Simpson’s at TJ Maxx? For those who revel in (and pay top dollar for) Versace’s exclusivity, the possibility seemed downright disastrous.

In her research, Wang finds that consumers forge a strong personal connection to the luxury brands they wear and feel threatened when the labels worn by people they perceive as dissimilar to them, based on demographic identities or economic status. They might even feel compelled to abandon the label they love as a result.

Established, professional women, for example, will contemplate abandoning a fashion brand when they see their elite labels on the arms of bling-wearing teens and club-going 20-somethings. “It loses that exclusivity and their special ties with the brand,” says Wang, assistant professor of marketing at the University of Maryland's Robert H. Smith School of Business.

Wang says her research, to be published in a forthcoming Journal of Marketing Research, shows that luxury brands can maintain the loyalty of their high-end customers by creating a high-end line-within-a-line that preserves those customers’ status as a member of the elite.

Results from six studies demonstrate that consumers with strong connections to a brand actually prefer to upgrade to a more exclusive product line, rather than abandoning a designer altogether. Wang says that’s because “their self-identity is tied to the brand.” 

“We find that customers with strong self-brand connections do feel threatened by dissimilar users of the brand,” Wang says. “Their response, however, is actually to purchase more of the brand’s products, but to limit themselves to the more exclusive, higher-end products.”

Those strong ties, she explains, aren’t easily broken.

She says brands can work to retain their elite customers, even as they pursue a wider customer base that spans income levels, by offering more exclusive products, “such as limited editions and new collections.”

Many brands are beginning to do that. Wang and her co-author Deborah Roedder John, from the University of Minnesota, describe that many elite brands offer a portfolio of products with different offerings that vary by price point, availability and exclusivity. The Coach leather goods company, for example, sells over 150 different handbags at prices ranging from $150 to over $1500, with more exclusive items sold only at its flagship stores. 

Louis Vuitton, meanwhile, recently opened its first Haute Maroquinerie store in the U.S., which allows customers to design handbags with over 40,000 possible combinations of leathers, sizes and colors. To main the exclusivity, these products need to be difficult to attain, instead of easier, which is counterintuitive to many brands who actually want to serve their VIP customers with more convenience.  

“Our findings have important implications for marketing managers,” the authors say. “Our research is the first to examine how different consumer segments respond to dissimilar users. We focus on consumers with strong self-brand connections, who are especially important as they are often a brand’s most loyal consumers.” 

Concerns about what happens to a label’s cachet as the brand looks to attract a broader customer base are pronounced in the luxury segment. Status brands, such as Louis Vuitton and Burberry, have in recent years expanded their price tiers and distribution to make their products more accessible to groups such as teens and young adults. 

But to be successful, Wang says, high-end designers must dote upon its faithful consumers, even as it looks to entice new entrants.