Business model innovation
2
Comparative Business Model
Institution Name
Student’s Name
Date
A company's internal logic is reflected in what is known as its "business model." A significant degree of complexity is inherent in running a business; nevertheless, with the help of a business model, executives are able to graphically streamline the internal process of the company and identify the nine important building pieces that are responsible for bringing the market value. This model can be simplified further in the fashion industry by concentrating on the four primary factors that differentiate firms from one another. These are the value proposition of the company, the customer segmentation, the communication and supply process, and the level of complexity in the value chain of the company (Ko et al. 2019). The link that is made between a firm's value proposition (also known as the solution) and the target market (also known as the consumers the company hopes to assist) is the essential component of a business model. This connection is also known as the "customer connection." This paper will discuss the different elements of two competing business models; luxury brands and premium brand.
Luxury Brand Model
Business Purpose
A luxury brand model is an intricate structure that communicates information about quality, genealogy, social position, and personal preference. It typically consists of a collection of graphical identifiers, such as a unique logo, monograms, patterns, and photographs, among other things. Bottega Veneta is a wonderful example of this since the company's leather goods don't exhibit any visible insignia or logos, but the woven leather pattern on the items allows the company to be easily identified. The objective of a luxury brand is to generate the greatest amount of brand value and price power possible by capitalizing on a number of different brand aspects, such as legacy, place of origin, workmanship, exclusivity, and prominent customers (Ko et al. 2019).
Customer Segment
Luxury brands will preferably target clients who are often referred to as HNWIs (High Net Worth Individuals). The price point has little influence on this sort of consumer's buying selection since they appreciate the experience of shopping a lot more than they value money. This is not to say that those luxury brands aren't interested in attracting more "ordinary" customers.
Customer Offer
· Performance: A great experience both in terms of how it works and how it makes you feel.
· Pedigree: A long and interesting history that adds to the specialness of the brand.
· Limited supply: Products are produced in limited quantities or with unique ingredients like platinum.
· Public figures: It doesn't have to be a paid endorsement, and the best thing is for the brand to appear naturally with famous people at events, etc.
· Pricing: Luxury brands keep their perceived value high in order to charge more.
Supply Process
Exclusive distribution is the supply strategy followed by luxury businesses in marketing terms. Businesses in the luxury market must provide a shopping experience that can convey the maximum capabilities of their brand message. Fully owned retail is a must for luxury brands that want to establish an atmosphere suitable for educating, enlightening, and entertaining their clients (Ko et al. 2019). That's why, in the luxury market, corporations build their market by opening 'flagship shops,' which are one-of-a-kind stores in one-of-a-kind locations that enable them to deploy the artistic and educational parts of the brand. These shops are less concerned with sales and more concerned with establishing a venue for engagement among various brand stakeholders.
Performance
Compared to brands that offer equivalent tangible advantages, luxury firms are able to charge higher prices for their products and services. On contrary, the trait of "high price" is a result of the best results and reliability that luxury brands offer consistently and without exception.
Core Competencies Organizational Structure
The raw materials used in the creation of luxury goods are of the highest possible quality. Whereas in the past luxurious materials like exotic animal furs and feathers were considered top of the line, today's fashion trends favor cutting-edge synthetic fabrics. Luxury and good design go hand in hand; the style of a luxury product is what sets it apart from others, proving that even in the age of mass production, originality and creativity are still possible. Luxury buyers are easily pleased, and manufacturers continue to satisfy this need.
Premium Brand Business Model
Business purpose
The idea behind the premium business model is to target customers with more discerning tastes by providing high-end goods and services that meet their needs. Given that quality is frequently a matter of opinion, a premium business strategy places a significant emphasis on the image of the brand. The goal of this kind of company strategy is to achieve a larger profit margin while maintaining a lower volume of sales (Chu, 2021).
Customer segment
The high-income sector, also known as the premium market, is comprised of wealthy individuals who are able to purchase top-tier and luxury products. The tastes of the individuals who belong into this market group are often taken into consideration throughout the development process of premium brands, so that the resulting products are a good fit for those individuals. Because fewer individuals earn enough money to purchase premium products, this segment is less than one may think.
People who want premium brands work hard to achieve an income level that is high enough to allow them to participate in the premium market segment; as a result, the premium market segment is influenced by the premium brand sector. The age range of 25 - 44 years old is the demographic that premium brands are aiming at nowadays. They account for sixty-four percent of the total audience, the younger generation between the ages of 16 and 24, known colloquially as Generation Z are also the targeted segments. They represent an additional sizable portion of the audience fashion businesses are trying to reach (Chu, 2021).
Customer offer
The marketing strategies used by premium companies are aimed at increasing the perceived value of the goods and services they provide. People have a deep-seated need to be seen as capable, desirable, and even enviable by their peers. They will place a higher value on a service or product that can assist them in experiencing these emotions and will be willing to pay a higher price for it.
Supply process
. In the premium market, it is essential to provide goods of the highest possible quality; thus, the sourcing process guarantees the use of high-quality components and raw materials and each stage of the production process is consistent with the quality standard that is required. As a direct result of this, it is frequently necessary to acquire materials in certain countries (for example, leather in Italy, crocodile skin in Australia) and also from specialist suppliers. In a similar vein, the stages of manufacturing that are considered to be the most vital, such as the cutting step, are to be retained in-house, while the less vital and more labor-intensive phases are to be outsourced.
Performance
The performance leadership of a premium brand in its market category, as well as an exceptional, product-specific basic and supplementary advantage, are the defining characteristics of a premium brand system. Premium companies are able to command greater costs for their goods and services in comparison to brands that provide comparable tangibly useful benefits. The characteristic of "high pricing," on the other hand, is a consequence of the optimum performances and quality that premium brands provide on a constant basis and without compromising (Sarkar, 2021).
Core competency’s organizational structure
Majority of firms link themselves with the "hand-made" attribute, and make sure to include their lengthy tradition in their brand narrative. The handbag is an instance of a premium product that stresses workmanship. Quality is driven by distinctiveness and limited editions. We can observe throughout the history of elegance how the garments worn by the highest classes were not easily duplicated by other tailors. Luxury has grown ironically vast in recent years, yet it is still dictated by celebrities and others, and things have a brief sales cycle, creating the illusion of scarcity required to generate luxury.
References
Chu, X. Y., Chang, C. T., & Lee, A. Y. (2021). Values Created from Far and Near: Influence of Spatial Distance on Brand Evaluation. Journal of Marketing, 85(6), 162-175.
De Silva, S. S., Seeley, E. L., Ongsakul, V., & Ahmed, Z. U. (2020). Conceptualizing a new model for luxury brand purchase intention in an emerging country setting. Journal of Transnational Management, 25(2), 100-127.
Ko, E., Costello, J. P., & Taylor, C. R. (2019). What is a luxury brand? A new definition and review of the literature. Journal of Business Research, 99, 405-413.
Sarkar, J. G., Sreejesh, S., Sarkar, A., & Dwivedi, Y. K. (2021). Impact of self‐brand connection on willingness to pay premium: Relevant mediators and moderators. Psychology & Marketing, 38(11), 1942-1959.