Regional Approach To Luxury Market Segmentation: The Case Of Western Balkans

Nature of the luxury brand requires limited market in order to maintain exclusivity. Individual countries in the Western Balkans are not lucrative per se, therefore, regional segmentation is needed in the case of luxury brands. Countries of Western Balkan, i.e. Bosnia and Herzegovina, Croatia, Serbia and Slovenia are all post-socialist, post-war countries currently going through major transitions. Rather small markets are yet to be established in its final form politically, economically, socially and culturally and individually. Foreign investors and world’s leading companies are concerned mainly about the size of the potential individual market. The main idea of this paper is to analyze luxury consumption in the Western Balkans region in order to identify some consumption patterns and to describe the regional luxury consumer. Broad study among 800 respondents in four countries defines demographics and buying intent of the luxury consumers. Moreover, this study identified luxury consumer region-wide and helps luxury brand managers to target those small countries together as a rather significant market segment of approximately 20.000 consumers. The region that has shared similar historical and cultural facts proved to have similar or the same luxury consumption patterns. This paper has significant practical value for the luxury brand managers and their segmentation of the Western Balkan countries. They will decide much easier to target this region knowing that consumers are sharing the same lifestyle and preferences regarding the luxury consumption. Main limitation of the research is the average income of the sample. However, the top market segment is always difficult to reach with surveys, therefore, qualitative approach might be used in the further studies in this regard.


Luxury Consumption
Traditionally, luxury goods or status goods have been defined as goods, apart from its any functional utility, use or display brings prestige to the owner (Grossman and Sharpiro 1988). Phau and Prendergast (2001) assume that luxury brands ‚evoke exclusivity, have a well known brand identity, enjoy high brand awareness and perceived quality, and retain sales levels and customer loyalty.‛ Similarly, Beverland (2004) has created a luxury brand model with the following dimensions: product integrity, value driven emergence, culture, history, marketing and endorsement. To summarize it all, Vigneron and Johnson (1999) defines five values of prestige behaviour combined with five relevant motivations from which five different categories of prestige consumers identified. According to their research, hedonists and perfectionists are more interested in pleasure derived from the use of luxury products, yet, less interested in the price than they are interested in quality, product characteristics and performance. These consumers know what they want and use their own judgment letting price exists only as a proof of quality. The Veblen, snob and bandwagon effects are evident with consumers who perceive price as the most important factor, giving higher price indication of greater prestige. They usually buy rare products and this way, they emphasize their status.
The more unique and expensive the brand is (compared to normal standards), the more valuable it becomes (Verhallen and Robben 1994). The perceived uniqueness comes from the fact that the vast majority of luxury brands have strong cultural roots; many enjoy a long history that stretches across multiple generations of artisans. Under these conditions, luxury brands become bearers of tradition of craftsmanship. These factors ultimately translate into added value of a luxury good or service, granting customers a sense of exclusivity and making them feel special (Kapferer 2009). Luxury products are purchased and used to arouse feelings and affective states received from personal rewards and fulfilment (Sheth et al. 1991;Westbrook and Oliver, 1991). For materialistic individuals, possessions of luxury brand serve as a signal or source of communication to portray and manage impressions about who they are and what their status or position is in a society (Douglas and Isherwood 1979;Belk 1985). Moreover, when a person endorses a specific brand that person is communicating a desire to be associated with the kind of people s/he perceives to consume that brand.
Consumers with preferences for high prestige should favour brands that (1) reinforce their own actual or desired prestigious self-image; (2) communicate this self-image to other individuals (Deeter-Schmelz, Moore and Goebel 2000).
Products sensitive to social influence as a display of wealth are the most visible. They include personal luxury items (e.g. clothing, accessories, watches and jewellery), automobiles, yachts and high-end kitchen and living room furniture. Long-term mastery move of the luxury industry used to be ‚logofictation‛ of the handbag, with other words, plastering recognizable symbols in a continuous pattern all over the bag instantly (Chadha critics suggest that the entire industry may be taking a new course due to noticeable changes in external environment. One factor that has had an influence on the luxury industry is the shift in consumer demand.
For instance, consumers in emerging markets are becoming more sophisticated in their tastes. Once in love with everything showy, they are gradually evolving in their tastes, giving more preference to ‚timeless‛ designs and discreet elegance.
Ten defining characteristics of luxury brands by Keller (2009) are:  Maintaining a premium image for luxury brands is crucial; controlling that image is, thus, a priority;  Luxury branding typically involves the creation of many intangible brand associations and an aspiration image;  All aspects of the marketing program for luxury brands must be aligned to ensure quality products and services and pleasurable purchase and consumption experiences;  Brand elements besides brand names, logos, symbols, packaging, and signage so on can be important drivers of brand equity for luxury brands;  Secondary associations from linked personalities, events, countries and other entities can be important drivers of brand equity for luxury brands;  Luxury brands must carefully control distribution via a selective channel strategy;  Luxury brands must employ a premium pricing strategy with strong quality cues and few discounts and markdowns;  Brand architecture for luxury brands must be managed very carefully;  Competition for luxury brands must be defined broadly as they often compete with other luxury brands from other categories for discretionary consumer dollars;  Luxury brands must legally protect all trademarks and aggressively combat counterfeits.
Despite all these changes in the luxury market, it's the brand, not the business, is inarguably being a reason why consumers choose these goods and services (Danet, Feldmeth, Ricca, Stucky and Hales 2009). Likewise, it is the brand that influences behaviour more than factors like distribution, functionality or even price.
Ultimately, brand is responsible for most of the value created by the business. Therefore, it is important to keep in mind that luxury brands function differently than other brands (Danet et al. 2009). Their challenge is to develop the brand without jeopardizing its appeal, largely basing on its limited diffusion level.

Conclusion
Specific nature of the luxury products and the premium price are determining the purchase intensity. As defined by Chadha and Husband (2006), there are luxury gourmets, those who spend significant amount of money on luxury, seasonal luxury consumers and consumers on diet. Western Balkan economies do struggle at the moment, so it is difficult to talk about large quantities of the luxury consumption. Therefore, potential investors should aim for the ‚consumers on diet‛ or those who don't spend as much, but it is expected that there is a significant number of them. In this sense, individual markets in question are not sufficient to be considered as a lucrative target. The only possibility is to target the regional market with no modifications. This research showed that there are similarities in chosen four regions regarding the luxury consumption.
Luxury brand managers can consider these four regions as homogenous market for their products.
Businesses can benefit from this research results due to its significant practical contribution.
The main limitation of this research is the income and age structure of the sample, nevertheless, this also points out new target segment for light users of the luxury products; young and educated professionals standing at the beginning of the family life cycle with the highest discretionary income. This group of consumers are the ones who desire to indulge themselves with occasional luxury and they can afford it.
Existing studies show that there are ‚culture-independent‛ product categories (e.g. fashion apparel, cars, leather goods, jewellery) where consumer behaviour does not vary notably across cultures or countries. In other words, luxury consumers have similar characteristics worldwide. Geographical location is not a good point for market segmentation of the luxury brands. Therefore, in order to remain present in the Western Balkan market, the best strategy for luxury brands is to see this region as one market and target all the consumers our these four countries with the same marketing mix.