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 ...