Applying Machine Learning to Luxury Marketing: Utilizing Prediction Model to Develop Brand Strategy

Abstract

As the luxury market is recovering after the Covid-19 pandemic, luxury companies are utilizing various methods to maintain and expand their customer cohorts. Machine learning prediction model is one effective way to do purchase anticipation and strategy development. Existing studies of machine learning in the business field mainly focus on model construction, while research around luxury marketing is mostly theory-based and lacks model support. Therefore, in this paper, the author constructed the machine learning model and applied the result to luxury brand strategy development. The AO (Aesthetics and Ontology) Framework was used to classify luxury customers into four cohorts. For model construction, the author referred to another machine learning research in the luxury field. Decision tree classification algorithm was used to construct the model as it outperforms other algorithms. As a result, the author uses the prediction results to identify the four customer segments in the AO Framework and formulate luxury marketing strategies respectively. At last, the author points out that a more accurate machine-learning model is needed and there are requirements for data collection, but applying machine learning to the process of luxury marketing strategy development is necessary.