Building the dream online: Does participation in luxury brand's social media affect brand experience, brand affect, brand trust, and brand loyalty?

The global market for luxury goods has witnessed a phenomenal growth over the past decades. Along with the increasing demand that stems from increased purchasing power, emerging markets, and new wider consumer groups, traditional luxury brands have faced a fierce competition caused by new forms of luxury such as masstige and luxurious fashion. Likewise, the rapid growth of social networks and social media has fundamentally transformed the business environment, and the whole society. Digital networks have facilitated companies and consumers to build online consumption communities, which supports the recent shift of marketing focus on relationships and co-creation of value. Consequently, luxury brands have started to use social media for advertising and relationship marketing. Due to the dynamic and interactive digital environment the importance of brand stories has become even more apparent. While brand communities and online communities are widely studied, luxury brands and social media based brand communities (SMBBCs) have not received yet much academic attention. This study takes the approach of SMBBCs to investigate the influence of consumers’ participation in luxury brand’s social media on brand experience, and on key dependent variables in consumer behavior research: brand affect, brand trust, and brand loyalty. The purpose of this study is to examine the effectiveness of social media, and to contribute to the research on social media brand communities and brand-consumer relationships, as well as luxury brands. The study proposes a theoretical framework that combines two empirically developed constructs: brand experience, and brand affect/trust-brand loyalty constructs, and tests the model within a social media based luxury brand community context. The data were collected as an online survey from various social media, which resulted in 333 valid responses from consumers who follow a luxury brand’s social media. The study is quantitative by nature, and uses structural equation modeling (SEM) as the main method of analysis. To further examine the influence of participation on the focal construct, brand experience, analysis of variance (ANOVA) was also conducted. The results support the reasoning that participation in luxury brand’s social media affect consumer behavior. Social media following influences brand experience that accumulates in the long run, but participation affects also rapidly consumers new to the brand. Further, active participation and passive participation appear to have equal influence on brand experience. The findings reveal the chain of effects from brand related stimuli to brand affect, brand trust, and brand loyalty, and confirm the importance of affect in building brand loyalty. Keywords luxury brands, luksusbrändit, social media, sosiaalinen media, brand communities, brändiyhteisöt, brand experience, brändikokemus, brand loyalty, brändiuskollisuus, structural equation modeling, rakenneyhtälömallintaminen Table of contents 1 Introduction ______________________________________________________ 3 1.1 Luxury industry and digitalization ______________________________________________________ 3 1.2 Social media and business transformation _____________________________________________ 4 1.3 Research problem and objectives _______________________________________________________ 6 1.4 Key concepts ______________________________________________________________________________ 8 2 Social media and brand communities __________________________________ 9 2.1 Social networks and social media _____________________________________________________ 10 2.2 Brand community ______________________________________________________________________ 12 2.2.1 Definition of brand community ____________________________________________________ 12 2.2.2 Virtual and online brand community _____________________________________________ 15 2.2.3 Social media based brand communities (SMBBCs) _______________________________ 17 2.3 Communication in online brand community _________________________________________ 19 2.4 Participation in online brand community ____________________________________________ 21 2.5 Luxury brands and social media ______________________________________________________ 25 3 Luxury brand-­‐consumer relationship _________________________________ 28 3.1 The concept of luxury __________________________________________________________________ 28 3.2 Luxury consumption ___________________________________________________________________ 31 3.3 Luxury brand-­‐consumer relationship ________________________________________________ 36 3.4 Brand experience _______________________________________________________________________ 38 3.5 Key variables in consumer-­‐brand relationship ______________________________________ 42 3.5.1 Brand affect ________________________________________________________________________ 42 3.5.2 Brand trust _________________________________________________________________________ 44 3.5.3 Brand loyalty _______________________________________________________________________ 46 3.6 Research framework ___________________________________________________________________ 49 4 Methodology ____________________________________________________ 51 4.1 Survey development ___________________________________________________________________ 51 4.2 Data collection and description of data _______________________________________________ 54 5 Data analysis and findings __________________________________________ 58 5.1 Measurement model evaluation _______________________________________________________ 58 5.2 Structural model estimation ___________________________________________________________ 62 5.3 Comparison with a competing model _________________________________________________ 64 5.4 Additional findings _____________________________________________________________________ 66 6 Conclusions ______________________________________________________ 69 6.1 Discussion _______________________________________________________________________________ 69 6.2 Managerial implications _______________________________________________________________ 73 6.3 Limitations and future research _______________________________________________________ 74 7 References ______________________________________________________ 78 List of Appendices APPENDIX 1. Survey questionnaire _________________________________________________________ 89 APPENDIX 2. Factor analysis of participation variables ___________________________________ 90 APPENDIX 3. Correlation matrix ____________________________________________________________ 91 APPENDIX 4. ANOVA source tables, interaction effects ___________________________________ 92 List of Tables Table 1. Summary of research examples ____________________________________________________ 22 Table 2. Utilitarian and hedonic consumer behavior characteristics _____________________ 32