The Influence Of Customer Experience On The Purchasing Decision Of Luxury Customers

As the socio-economic context develops and changes, the new luxury concept has appeared and become the mainstream in the advanced and mature markets of the luxury industry. Meanwhile, customer experience has shown its potential in redefining the competitive scenario because it helps the firms to better and fully understand their customers through the perspective of the customer. Thus, customer experience management can be the answer to the luxury companies to attract the customers, who are no longer satisfied by a "thing" but an extraordinary experience. So the focus of this paper is to find out the real influence of customer experience on the purchasing decision of the luxury customers so as to understand the real thinking of the luxury customers and give implications to the practices.In the first part of introduction, the various practical examples and studies show that customer experience management has the potential to be new competitive advantages to attract customers, yet its practices and researches are just on the way and need further developments. What’s more, the luxury industry has proven that it is one of the important industries shaping the economic and especially the social-cultural context nowadays through its market size, growth potential, wide scope, and particularly the powerful and active luxury brands. Thus, the luxury market deserves our attention and effort to analyze. However, through a further analysis on the market structure and competitive scenarios of the luxury industry, we find that the traditional marketing policies—4P—have become less effective in differentiating the brand. Brand extension, though brings more brand awareness and sales, yet also runs the risks of diluting the brand equity. These operations are more like the necessary conditions to keep the firms in the battlefield than sufficient conditions to help the firms win the game. The luxury brands are still struggling to solve the dilemma of balancing exclusivity and accessibility. And from the implications of the former part, customer experience can be the suggested solution. However, the reality is that even though the importance of customer experience is widely accepted by the managers, yet the luxury companies still do not fully understand the concept and meaning of customer experience, and thus their performance in this field is not satisfying, which is different from the common perception that luxury brands are good at managing customer experience. The point is:"good" is not equal to "satisfying". Thus, the luxury firms need to understand what their customers expect from them and how to deliver a satisfying experience that effectively exceeds the customers’ expectation.In the theoretical part, we try to understand the definitions of the related terminologies and their implications. The luxury concept has evolved from the old luxury, whose focus is on owning, in to the new luxury, whose focus is on experiencing. The luxury consumption become to show how confident you are rather than how much money you have. That is to say, the old luxury is defined from an external perspective while the new luxury is defined from an internal perspective. On the other hand, customer experience is a relatively new concept, whose rising is due to the growing focus on the customer needs. And some common features of customer experience have been recognized. First, customer experience is derived from all the touch points or moments of truths between the firm and their customers. Second, customer satisfaction is based on their customer experience, which means that firms need not only manage the expectation of the customers but also effectively deliver the experience in order to exceed the expectation. Third, customer experience is strictly personal and involves the customer more in the emotional aspect than in the rational aspect. It is concluded that products or services should be integrated parts of the total customer experience, and the customer value derived from physical goods is really the total experience provided, not or not only the good itself. In this sense, the luxury firms should be more requiring of building their competitive advantages on the base of customer experience, for whose value is more derived from the emotional value than from the value of the product.Furthermore, through the analysis on the related researches on the purchasing decision process of luxury customers, we find that the motivation behind the purchase of the luxury goods can be divided into:social distinction, which means differentiation and keeping space at a mature level or simply showing off at an immature level; self-realization, which means fulfilling one’s own personal identity; and self-entertainment, which means purchasing joy and happiness. What’s more, during the decision-making process, the emotional aspect overwhelms the rational aspect to serve as the dominant driver in evaluating the criteria and making the final decision. Besides, other related studies show that customer satisfaction has become the main influencer of the profitability of a company. And combined with the former analysis, it can be assumed that customer experience establishes customer satisfaction, and thus customer experience should have a strong relationship with firms’ profitability. But there are few studies that shed light on this field, especially to the luxury market. So, through the empirical studies in this paper, we try to find out their specific relations in the luxury market.In the third part, we introduce the research methods applied in this paper. In evaluating the customer experience management performance, the CEXI(?) research—which is a mystery shopping-based methodology which TCSG developed in collaboration with ICM Advisors to determine the qualitative level of customer experience by evaluating all the touch points between the customers and the brand—is used due to its obvious advantages. CEXI(?) research tracks on a wide range of touch points between the firms and customers, uses professional and experienced researchers and evaluators, and has a wide coverage of samples. Thus, CEXI(?) is a good proximity of the real customer experience. The purchasing decision of the customers is evaluated through an indirect method under the logic that the aggregate purchasing decision of all the customers will be finally reflected on the sales of the firms. And three indicators—brand value, sales per store, and conversion rate—are applied, due to different consideration.The methodology of the empirical studies in this paper is by considering all the possible factors and building up the assumptions at the first step, and then removing the rejected factors according to the statistic results.In the fourth part of empirical analysis, we have the following findings:First, the customer experience delivery of luxury stores are not as satisfying as expected, whose weaknesses mainly lay on the management of the soft or emotional touch points of the customers. Second, the rejection to the correlation between CEXI(?) and brand value shows that brand value is influenced by many factors and customer experience might be one of them but absolutely not significant. Third, since the CEXI(?) has a strong emphasis on the in-store experience, its insignificant or weak correlation with sales per store shows that the in-store experience fails to explain to the changes of sales in a store. However, by linking the analysis of sales per store and that of conversion rate, it is can be inferred that the out-store experience plays a very important role in the purchasing decision of the luxury customers by attracting their attentions and arousing their interests, and the delivery of satisfying in-store experience can persuade the interested customers into making a real purchase. This is the fourth findings. Five, customer experience as a whole influence the purchasing decision of luxury customers and the touch points are strongly correlated with and influence each other. In conclusion, the answer to the task of the paper is that customer experience, as a broad concept concerning the all the touch points between the firms and the customers, does effectively influence the purchasing decision of the luxury customers in terms that the customers’interests on the brand start from their out-store contacts with the brand and their purchase actions are driven by the consistent satisfying experience received when they are in the store.Lastly, based on the findings from the empirical studies, the following suggestions are given: First, customer relationship management is not longer enough by focusing on Integrated Marketing Communication (IMC), for the new luxury customers cannot be easily satisfied by the proper messaging, which, thus should be the replaced by the consistent customer experience management. Second, customer experience management should be a strategic concern. Third, the delivery of customer experience should be consistent. Fourth, emotional touch points and relational touch points are the key factors in customer experience management. Fifth, customer experience management is one of the key elements in the brand system but it cannot solve all the problems.