Project

Luxury Services

Goal: The market for luxury is growing rapidly. While there is a significant body of literature on luxury goods, academic research has largely ignored luxury services. The purpose of this project is to open luxury services as a new field of investigation by developing the theoretical and conceptual underpinnings to build the luxury services literature and show how luxury services differ from both luxury goods and from ordinary (i.e. non-luxury) services.

Date: 1 January 2020

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Project log

Jochen Wirtz
added a research item
This chapter extends the emerging literature on luxury services (Holmqvist et al. 2020; Wirtz et al. 2020) by developing the key concepts of hedonic escapism as well as multifaceted exclusivity. We first developed the role of hedonic escapism in rendering luxury services enjoyable and extraordinary. This represents a key implication for managers of luxury services: customers engaging in a luxury service usually have high expectations and demands that the service needs to satisfy. Even though the service quality may be very high, this may not be enough in itself and would rather fall into the ‘good service’ category. While this may often be enough for most services, it is less likely to meet the demands of customers expecting an extraordinary experience. This challenge to deliver the extraordinary, even to customers who become used to the very best service quality, represents a crucial challenge for managers in luxury services. In addition to hedonic escapism, we also contribute to research on luxury services by extending the role of exclusivity and detail four different manifestations of exclusivity in luxury service contexts. For practitioners in luxury services, we believe that appeal of exclusivity as well as the role of exclusivity in keeping luxury services attractive are best understood through the lens of customer value in social contexts (Edvardsson et al. 2011). Building on this value in social context, we find conspicuous consumption and exclusivity of particular importance for luxury service managers. First, managers should explore how they can manage exclusivity to increase the appeal of the service for conspicuous consumers. Given the risk of hedonic adaptation reducing the appeal of luxury over time (Wiesing 2015), we believe that service managers could employ all the four forms of exclusivity in order to keep the service feeling special for the customers. For example, conspicuous consumption can be enhanced by tangible cues, such as branded souvenirs and giveaways, and materialized through stories and photos. Special attention should be placed on social media which can help enhancing conspicuousness of services. Customers can ‘post‘ and ‘share‘ luxury experiences, for example, related to dining and the arts, and signal their affluence and sophistication. Service firms should encourage this, for example, by offering ‘instagrammable’ cues (Wirtz et al., 2020). Not every luxury customers is interested in conspicuous consumption. As luxury services are consumed and experienced at the same time, luxury service providers have to proactively manage conspicuousness. For example, a celebrity dining out may want to sit at a quiet table in order not to be disturbed by fans. Many top-end travelers value privacy and Singapore Airlines therefore has private first class check-in lounges in Singapore that even comes with a private link directly to immigration, after which passengers can proceed to Singapore Airlines’ first class lounges. Even on board, privacy is provided in its suites with a sliding door that screens the outside world away (Wirtz et al. 2020) Second, managers should explore using the gamut of the different types of exclusivity to enhance the luxury experience. Monetary exclusivity is obvious and simply means luxury service firms need to be extremely careful with price promotions. Social exclusivity combines with the constructed exclusivity of luxury goods to allow service providers to limit and to control access to the service in order to enhance its appeal. Upscale clubs screen at the entrance, exclusive social events can be made ‘by-invitation-only,’ and luxury servicescapes can even be designed to intimidate non-target consumers (Dion and Borraz, 2017). Hedonic exclusivity can be used to target a service only at the initiated whereby a certain degree of expertise serves as a barrier for the less initiated to fully appreciating a service. In closing, we believe that luxury services are important and deserve research attention. This chapter further shows that luxury services need to be studied in their own right rather than being subsumed in the much more developed luxury goods literature. We hope that this chapter will inspire more research in the field of luxury services.
Jochen Wirtz
added 2 research items
Digitization, artificial intelligence (AI), and service robots will revolutionize virtually all service industries and have the potential to bring unprecedented improvements in customer experience, service quality, and productivity. However, these technological advances also carry serious ethical, fairness, and privacy risks. To explore these risks, this article builds on recent work on corporate digital responsibility (CDR). First, it uses a life-cycle stage perspective of data and technologies (i.e., their creation, operation, refinement, and retainment) as an organizing frame to better understand these risks. Second, to provide insights on where these risks originate, it examines an organization’s business model and its flows of money, service, data, insights, and technologies with customers at the front-end and the business partner ecosystem at the back-end. Third, this article identifies why CDR issues occur. It shows that trade-offs between good CDR practices and five organizational objectives and motivations are key underlying causes (e.g., incremental sales can be achieved with better data and analytics but carry a gamut of privacy, fairness, discrimination and psychological risks). Finally, this article proposes a set of strategies, tools and practices managers can use to address these trade-offs and build a CDR-strong service organization.
The world of luxury is undergoing rapid changes as many classic luxury brands embark on markedly different strategies to deal with an increasingly digital economy. Some luxury brands such as Chanel and Bottega Veneta have deliberately chosen to minimize the impact of digitization and instead focus even more heavily on the traditional service encounter in their boutiques. Other luxury brands like Dior, Saint Laurent and Hermès follow a different strategy as they push innovative new digital services which led to rapidly growing online sales. At their core, all of these brands continue to sell luxury fashion, yet their approach to digitization of the service encounter could not be more different while they all wish to remain exclusive. How could luxury fashion brands develop their digital service strategy and at the same time retain the exclusive and personalized service their customers expect?
Jochen Wirtz
added an update
See the video that accompanies our paper on digital technology in the luxury service - customer interface: https://www.facebook.com/NUSBusinessSchool/videos/597263167600685
 
Jochen Wirtz
added an update
This paper has just been accepted for publication -
Abstract: Luxury brands have been reluctant to adopt technology-enhanced multi-actor interactions at the customer interface. This article synthesizes research on luxury and multi-actor interactions in non-luxury contexts to explore how luxury brands can adopt digitally enabled multi-actor service encounters. The literature is further supplemented by interviews with managers in luxury firms. Our findings caution against simply adopting approaches from non-luxury contexts as they risk undermining the luxury service experience. Rather, we develop a set of propositions at the intersections of the physical, digital, and social realms on how luxury brands can adapt the use of digital multi-actor interactions to augment rather than imperil their brand image. Specifically, our propositions help luxury managers to enhance the customer experience through hedonic escapism, strengthen their brand communities, and use digitization to simultaneously provide conspicuous customers with greater visibility and discreet customers with social exclusivity.
 
Jochen Wirtz
added a research item
Luxury brands have been reluctant to adopt technology-enhanced multi-actor interactions at the customer interface. This article synthesizes research on luxury and multi-actor interactions in non-luxury contexts to explore how luxury brands can adopt digitally enabled multi-actor service encounters. The literature is further supplemented by interviews with managers in luxury firms. Our findings caution against simply adopting approaches from non-luxury contexts as they risk undermining the luxury service experience. Rather, we develop a set of propositions at the intersections of the physical, digital, and social realms on how luxury brands can adapt the use of digital multi-actor interactions to augment rather than imperil their brand image. Specifically, our propositions help luxury managers to enhance the customer experience through hedonic escapism, strengthen their brand communities, and use digitization to simultaneously provide conspicuous customers with greater visibility and discreet customers with social exclusivity.
Jochen Wirtz
added an update
Our latest paper has just been accepted for publication -- citation -- Wirtz, Jochen, Jonas Holmqvist and Martin P. Fritze (2020), “Luxury Services”, Journal of Service Management, forthcoming.
Structured abstract
Purpose – The market for luxury is growing rapidly. While there is a significant body of literature on luxury goods, academic research has largely ignored luxury services. The purpose of this article is to open luxury services as a new field of investigation by developing the theoretical and conceptual underpinnings to build the luxury services literature and show how luxury services differ from both luxury goods and from ordinary (i.e. non-luxury) services.
Design/methodology/approach – This paper uses a conceptual approach drawing upon and synthesizing the luxury goods and services marketing literature.
Findings – This article makes three contributions. First, it shows that services are largely missing from the luxury literature, just as the field of luxury is mostly missing from the service literature. Second, it contrasts the key characteristics of services and related consumer behaviors with luxury goods. The service characteristics examined are nonownership, IHIP (i.e. intangibility, heterogeneity, inseparability, and perishability), the three additional Ps of services marketing (i.e. people, processes, and physical facilities) and the three-stage service consumption model. This article derives implications these characteristics have on luxury. For example, nonownership increases the importance of psychological ownership, reduces the importance of conspicuous consumption and the risk of counterfeiting. Third, this article defines luxury services as extraordinary hedonic experiences that are exclusive whereby exclusivity can be monetary, social and hedonic in nature, and luxuriousness is jointly determined by objective service features and subjective customer perceptions. Together, these characteristics place a service on a continuum ranging from everyday luxury to elite luxury.
Practical implications – This article provides suggestions on how firms can enhance psychological ownership of luxury services, manage conspicuous consumption, and use more effectively luxury services’ additional types of exclusivity (i.e. social and hedonic exclusivity).
Originality/value – This is the first paper to define luxury services and their characteristics, apply and link frameworks from the service literature to luxury, and to derive consumer insights from these for research and practice.
Keywords: luxury, luxury services, luxury experiences, hedonic experiences, exclusivity, conspicuous consumption
Paper type: Conceptual paper
 
Jochen Wirtz
added a research item
Purpose The market for luxury is growing rapidly. While there is a significant body of literature on luxury goods, academic research has largely ignored luxury services. The purpose of this article is to open luxury services as a new field of investigation by developing the theoretical and conceptual underpinnings to build the luxury services literature and show how luxury services differ from both luxury goods and from ordinary (i.e. non-luxury) services. Design/methodology/approach This paper uses a conceptual approach drawing upon and synthesizing the luxury goods and services marketing literature. Findings This article makes three contributions. First, it shows that services are largely missing from the luxury literature, just as the field of luxury is mostly missing from the service literature. Second, it contrasts the key characteristics of services and related consumer behaviors with luxury goods. The service characteristics examined are non-ownership, IHIP (i.e. intangibility, heterogeneity, inseparability, and perishability), the three additional Ps of services marketing (i.e. people, processes, and physical facilities) and the three-stage service consumption model. This article derives implications these characteristics have on luxury. For example, non-ownership increases the importance of psychological ownership, reduces the importance of conspicuous consumption and the risk of counterfeiting. Third, this article defines luxury services as extraordinary hedonic experiences that are exclusive whereby exclusivity can be monetary, social and hedonic in nature, and luxuriousness is jointly determined by objective service features and subjective customer perceptions. Together, these characteristics place a service on a continuum ranging from everyday luxury to elite luxury. Practical implications This article provides suggestions on how firms can enhance psychological ownership of luxury services, manage conspicuous consumption, and use more effectively luxury services' additional types of exclusivity (i.e. social and hedonic exclusivity). Originality/value This is the first paper to define luxury services and their characteristics, to apply and link frameworks from the service literature to luxury, and to derive consumer insights from these for research and practice.
Jochen Wirtz
added a project goal
The market for luxury is growing rapidly. While there is a significant body of literature on luxury goods, academic research has largely ignored luxury services. The purpose of this project is to open luxury services as a new field of investigation by developing the theoretical and conceptual underpinnings to build the luxury services literature and show how luxury services differ from both luxury goods and from ordinary (i.e. non-luxury) services.