The Luxury Strategy

Break the Rules of Marketing to Build Luxury Brands

Jean-Noël Kapferer, Vincent Bastien

• Publisher: Kogan Page
• Year: 2012
• ISBN:
  9780749464929
• Edition: 2
• Topic: Business
• Subtopic: Advertising
• Index: Business

Discover the secrets to successful luxury brand management with this bestselling guide written by two of the world's leading experts on luxury branding, Jean-Noël Kapferer and Vincent Bastien, providing a unique blueprint for luxury brands and companies. Having established itself as the definitive work on the essence of a luxury brand strategy, this book defines the differences between premium and luxury brands and products, analyzing the nature of true luxury brands and turning established marketing 'rules' upside-down. Written by two world experts on luxury branding, The Luxury Strategy provides the first rigorous blueprint for the effective management of luxury brands and companies at the highest level. This fully revised second edition of The Luxury Strategy explores the diversity of meanings of 'luxury' across different markets. It rationalizes those business models that have achieved profitability and unveils the original methods that were used to transform small family businesses such as Ferrari, Louis Vuitton, Cartier, Chanel, Armani, Gucci, and Ralph Lauren into profitable global brands.Now with a new section on marketing and selling luxury goods online and the impact of social networks and digital developments, this book has truly cemented its position as the authority on luxury strategy.

03

Anti-laws of marketing

The two previous chapters have shown that traditional marketing could not readily be applied to luxury, and drew attention to the anthropological, sociological and historical bases of luxury. The purpose behind this was to help understand that luxury is above all a social dynamic. It should also be clear by now that when managing a luxury brand, it is necessary to forget a fair number of laws of marketing, which may very well apply to brands, to premium brands, and even to trading up, but not to luxury.

The term ‘trading up’ (see Silverstein and Fiske, 2005) – persuading a client to choose an item from further up the range, to go up-market – essentially plays on the many excuses people can always find for treating themselves by buying something better and more expensive: a marketing logic is fine here. Trading up is very different from luxury, for it does not have the latter’s sociological dimension – its function is not so much social stratification as improving brand profitability.

Not only are traditional marketing techniques not suited to luxury, they can in fact be positively harmful to it. The truth is that traditional marketing is only concerned with the bottom of the luxury pyramid, where brands are no longer selling luxury products, but products derived from luxury brands. One also comes across traditional marketing in brands whose business model has to rely on licensing arrangements and the sale of accessories and perfumes as their sole means of remaining viable.

In this chapter we shall be putting forward 24 management principles, which we call anti-laws of marketing peculiar to luxury, as they are at the opposite extreme of what marketing doctrine normally preaches – and rightly so – concerning products and brands, even premium ones. They have been established and enacted by the world’s most profitable luxury companies.

1 Forget about ‘positioning’, luxury is not comparative

In consumer marketing, at the heart of every brand strategy you will find the concept of positioning, of the unique selling proposition (USP), and unique and convincing competitive advantage (UCCA). Every classic brand has to specify its positioning, and then convey it through its products, its services, its price, its distribution and its communication. Positioning is the difference that creates the preference for a given brand over the one that it has decided to target as a source of new business and that has clients it is going to try to win over. In the war that brought it into conflict with Pepsi Cola in the United States, Coca-Cola was ‘The real thing’ (its essential distinguishing feature), whereas Pepsi-Cola, introduced in the 1930s, plugged its image as a young people’s drink (‘The choice of the new generation’), thereby succeeding in boxing Coca-Cola into an image as a product that only parents drank. As we see, the classic brand always seeks to define itself by a key facet, depending on the market context, the main competitor, and the expectations of the target consumers it is aiming to reach.

Nothing is more foreign to this approach than luxury. When it comes to luxury, being unique is what counts, not any comparison with a competitor. Luxury is the expression of a taste, of a creative identity, of the intrinsic passion of a creator; luxury makes the bald statement ‘this is what I am’, not ‘that depends’ – which is what positioning implies. What made the Christian Lacroix brand is its image of bright sunshine, full of this designer’s bright, vivid colours, suffused with the culture of the Mediterranean; it certainly is not concerned with its positioning with respect to this or that already established designer. ‘Never compare yourself’ is the key motto.

It is identity that gives a brand that particularly powerful feeling of uniqueness, a timelessness, and the necessary authenticity that helps give an impression of permanence. Chanel has an identity, but not a positioning. Identity is not divisible, it is not negotiable – it simply is.

Luxury is ‘superlative’ and not ‘comparative’. It prefers to be faithful to an identity rather than always worrying about where it stands in relation to a competitor. What luxury is afraid of is copying, whereas mass-produced brands fear ‘undifferentiation’, trivialization. Chapter 6 will present models to define the luxury brand identity.

2 Does your product have enough flaws?

This is a provocative statement. For most people, luxury is the last word in hand-crafted or craftsman-built products. It is true that in surveys into the perception of luxury, consumers from all over the world were interviewed and the consensus was that ‘product excellence’ is the primary prerequisite of luxury. It would suffice to imagine a bisecting line between two axes – price and functional quality: at the very top right would be luxury. Now, in our view, nothing could be further from reality.

The aim of an upper-premium brand is to deliver a perfect product, to relentlessly pursue perfection. But it would need a touch of madness for it to be counted a luxury. Functionally, a Seiko watch is superior to most luxury watches – it is more accurate because it is a quartz watch and shows the time directly and in a perfectly legible manner (because it is displayed on a digital face). If you were to buy some of the famous brands of a luxury watch, you would probably be warned that it loses two minutes every year. The flaw is not only known, it is assumed – one could say that that is both its charm and its guarantee of authenticity. It is the specific and singular nature of the movement that is responsible for that. For luxury watchmakers like adding complications, indeed seek them out in their endless quest of art for art’s sake. This is the ‘madness’ touch that goes beyond perfection and make people collect them. Let’s look at some of the watches that Hermès has to offer, where the time is indicated by just four figures: 12, 3, 6 and 9. So you have to guess the time – as if knowing the time accurately was somehow unimportant, even pleasure-killing and dehumanizing. These watches are certainly far removed from those state-of-the-art precision chronograph watches, for luxury brands are not interested in being the leader in utilitarian or functional comparisons – primarily they are hedonistic and symbolic. Their ‘flaw’ is a source of emotion.

In the world of luxury, the models and the products must have character or personality. In the world of automobiles, a Ferrari is anything but a perfect car if you like easy, smooth and silent driving; that is why people would do anything to own one. Every model forces its owner to accept its flaws.

Of course, if a luxury product is not a flawless product, the reverse is not true: adding flaws does not turn a regular product into a luxury product.

3 Do not pander to your customers’ wishes

One of the most respected brands in the world is BMW. This ever-growing brand has been successful in creating a cult, a body of owners that are extremely faithful, devoted and committed to their brand. It is in fact, according to the Luxury Institute, one of the ‘the most admired car companies in the world’. What are the factors behind BMW’s success?:

• A clear brand identity, observed to the letter since 1962, summarized in a slogan never challenged since then, translated into every language – ‘Sheer driving pleasure’.
• A stable, family shareholding. Since 1959 the brand has been owned by the Quandt family. Its members believe in letting things take their time and accepts that it may lose clients in the short term to increase the value.
• A very German enterprise culture, characterized by its engineering and its product cult. Moreover, being descended from pioneers of aviation, there is a tremendous pride in this company.

BMW sells unequalled driving pleasure to people who know how to appreciate it. It has never built cars that were boring to drive. BMW has become an icon of standing and performance. In the 1990s it was the ‘official’ car of every yuppie or successful young executive eager to show off their success. What is less well known, however, is that despite its success, the brand has remained true to itself thanks to its willingness to resist client demands when these did not correspond to the company’s very precise vision as to what made for a true BMW. This does not mean the luxury brand should not care about its clients nor listen to them. However, it should do nothing that threatens its identity. An example that says a great deal about BMW is that consumers regularly curse each time a new 5 Series car is released, because it is certainly a fact that this model does not give rear passengers enough legroom. According to them, such stubbornness defies reason and good sense. But the makers object that to meet clients’ demands would be to spoil the purity of design of this car, its proportions having been meticulously calculated, as indeed were its aerodynamics. Some may remember the loss of aesthetics that the Jaguar E-type suffered following the addition of two full-size rear seats.

BMW is a good illustration of this principle according to which a luxury brand has to maintain a consistency over time and across its entire range, which guarantees its authenticity, and therefore its attraction, its mystique and its spark. In traditional marketing, the customer is king. Procter & Gamble’s corporate identity relies not on one person, or even on one category of product, but on a methodology that puts the customers’ desires at the heart of the business: Procter & Gamble does it by listening to its customers – listening to what they have to say or are trying to say – then transforming these wishes into global, or at least regional, products that are then sold through mass distribution channels. The luxury brand, on the other hand, comes from the mind of its creator, driven by a long-term vision. There are two ways to go bankrupt: not listening to the client, but also listening to the client too much.

This relationship with the client is typical of post-modern luxury and dates back to the 19th century. Historically, luxury was the creation of a talented craftsperson, using the very rarest materials, who accepted commissions from a client or patron. These craftspeople were known in their day, but their fame did not endure. That is how castles and private mansions were built and furnished. In France, everything changed when at the end of the 18th century craftspeople stopped accepting private commissions after someone came up with the idea of making models, before they too were sold. What we were witnessing at that time was a radical reversal of the relationship between omnipotent client and craftsperson. No longer was the craftsperson prepared to go cap-in-hand to visit the client; instead, people went to them to see their latest collections, their new creations. The age of the nameless craftsperson was now long gone – enter now on stage the creative designer and his or her retinue, the designer’s followers. Not to mention the reputation of the designer’s name.

4 Keep non-enthusiasts out

In traditional marketing there is this obsession with poaching clients from other brands: sales growth is management’s principal measure of success and of the performance of its managers. This leads companies to come up with new products that will help extend market penetration and thus steal a march on competitive brands. To increase the relevance of the brand – the number of people who would say that the brand was of interest to them – it is necessary to avoid being too exclusive or too different.

When it comes to luxury, trying to make a brand more relevant is to dilute its value, because not only does the brand lose some of its unique features, but also its wider availability erodes the dream potential among the elite, among leaders of opinion. BMW is typical of a brand that is able to grow without cutting back on its rugged features, which are in any event highly exclusive. The Bavarian management team has calculated that BMW’s target accounts for 20 per cent of the premium segment of the population – only one person in five. This means that 80 per cent are not at all attracted by BMW’s values. The brand has preferred to exclude these 80 per cent and base its growth on its true target, those who wholeheartedly share its values. Brand growth is achieved by penetrating new countries, not new customer segments. In order to grow, the BMW Group preferred to buy two other brands which on their own, like BMW, define a segment – MINI and Rolls-Royce – having taken good care to keep Rolls-Royce’s identity separate from BMW’s.

5 Do not respond to rising demand

The prime objective of traditional marketing is volume growth. Traditional marketing sets its sights at achieving leadership in market share to gain muscle with mass distributors, department stores and superstores, and presents itself as a force to be reckoned with in some of its lines. This ensures wide distribution and broad visibility and provides the justification for a national television advertising campaign. With sufficient volume, the business can work with small margins and still make money. This is the essence of the mass marketing model. Product managers are then judged on just one criterion – growth in annual results. At Ferrero (with brands including Kinder, Nutella and Tic Tac) it is not allowed to fall below double figures. The job of each product manager is to increase the penetration be it of Kinder Surprise, be it of Kinder Bueno, and then to push up per capita volume (consumption frequency). If the demand goes up, there have to be supplies to match it – that’s the key to this economic model. Not to satisfy rising demand is to annoy the distributor because unhappy customers will not wait and will always hold it against the company. They will take their revenge by gossiping over dinner about their bad experience with the brand. What an absolute scandal having to wait! Sheer mismanagement!

At Ferrari, production is deliberately kept to fewer than 6,000 vehicles a year – rarity value sells. So long, that is, as the customer understands why the product is rare and is prepared to wait. Rarity can be managed just like the relationship with the clientele; so it is not a matter here of poor sales forecasting but of a deliberate strategy of resisting demand in order to be master of it. ‘When a product sells too much we stop producing it,’ says Hermès CEO.

This law represents a huge challenge for the most successful brands worldwide – such as Louis Vuitton or Rolex – and is linked to the ‘dream equation’ (see Figure 6.4), a consequence of the social stratification role of luxury, that will be discussed in Chapter 11: a luxury brand must have far more people who know it and dream of it than people who buy it.

When you are just a local luxury brand, going global is the way of growing in volume without damaging the ‘dream value’ of your brand through market saturation. For the luxury European brands, the US market, and then the Asian market (Japan, followed by Korea and Taiwan, and now China) have created this opportunity of growth in volume without damaging the dream.

But when you are a global brand, you reach a limit. Either you stick to a luxury strategy – you stop growing in volume and you increase...

Table of contents

• Halftitle Page
• Title Page
• Contents
• Introduction: to be or not to be luxury
• Part 01 Back to luxury fundamentals
• 01 In the beginning there was luxury
• A brief history of luxury
• The 20th century and the democratization of luxury
• Luxury, the individual and society
• Positioning of luxury in our present-day society
• Money, fashion, art and luxury: boundaries and ambiguities
• Luxury: learning from religion and art
• 02 The end of a confusion: premium is not luxury
• The multiple approaches to the concept of luxury
• Denying the specificity of luxury
• There is no continuous movement from premium to luxury
• It is not easy to exit luxury through a ‘downwards’ strategy
• From where has the current confusion arisen?
• Towards a definition of luxury
• Exiting the confusion: the case of the car
• Relativity of luxury in cars
• Is automobile luxury the pursuit of perfection?
• Top-of-the-range, upper-premium and luxury cars
• The luxury car: creation, mythical models and social prestige
• What link does luxury have with technology?
• The constituents of the myth of the luxury car
• Luxury and expressions of national identity
• Beyond the product: services and privileges
• The magic of cult objects: licences and boutiques
• 03 Anti-laws of marketing
• 1 Forget about ‘positioning’, luxury is not comparative
• 2 Does your product have enough flaws?
• 3 Do not pander to your customers’ wishes
• 4 Keep non-enthusiasts out
• 5 Do not respond to rising demand
• 6 Dominate the client
• 7 Make it difficult for clients to buy
• 8 Protect clients from non-clients, the big from the small
• 9 The role of advertising is not to sell
• 10 Communicate to those you are not targeting
• 11 The presumed price should always seem higher than the actual price
• 12 Luxury sets the price, price does not set luxury
• 13 Raise your prices as time goes on in order to increase demand
• 14 Keep raising the average price of the product range
• 15 Do not sell
• 16 Keep stars out of your advertising
• 17 Cultivate closeness to the arts for initiates
• 18 Do not relocate your factories
• 19 Do not hire consultants
• 20 Do not test
• 21 Do not look for consensus
• 22 Do not look after group synergies
• 23 Do not look for cost reduction
• 24 Just sell marginally on the internet
• 04 Facets of luxury today
• On the importance of the ‘label’
• Luxury: the product and the brand
• The ingredients of the luxury product: complexity and work
• Superlative, never comparative
• Luxury and cultural mediation
• Luxury and history
• Luxury and time
• Tradition is not passéisme
• Luxury is made by hand
• Real or virtual rarity?
• Rarity and sustainability
• Luxury and exclusivity
• Luxury and fashion: an essential difference
• Luxury and art
• Luxury and charity
• Part 02 Luxury brands need specific management
• 05 Customer attitudes vis-à-vis luxury
• What is the size of the market?
• To be rich or to be modern?
• Heavy users and day trippers
• The four luxury clienteles
• A strong axis of segmentation: sensitivity to the product or to the logo?
• A second axis of differentiation: authentic does not always mean historical
• A third axis of differentiation: disruption or integration?
• How countries differ in their attitudes
• Why are Western luxury brands globalized?
• China today and tomorrow
• Why India resists Western luxury
• Russia: the psychology of oligarchs
• 06 Developing brand equity
• There is no luxury without brands
• Managing luxury by the brand
• Products, experiences and brands
• A luxury brand is a real and living person
• A luxury brand has roots
• A luxury brand must radiate
• No life cycle for the luxury brand
• A legitimacy created from authority, class and creation, more than from expertise
• The financial value of luxury brands
• The core of the luxury brand: its identity
• Building brand coherence at contact points: central and peripheral identity traits
• Two modes of luxury brand building
• Building the luxury brand: the dream equation
• The luxury brand compass: architecture of product roles
• Luxury brand equity in the digital era
• Why and how does the digital world challenge luxury?
• Managing the dream through communication
• Defending the brand against counterfeiting
• Counterfeiting as a way to diagnose the health of the strategy of the brand
• Always defend your rights and communicate frequently
• 07 Luxury brand stretching
• Luxury expansion through line extensions and brand extensions
• The origins of luxury brand stretching
• Luxury stretching: a practice that has changed the sector
• Comparing the Italian and French models of extension
• Two models for brand stretching: vertical or horizontal?
• The pyramid
• The galaxy
• Success factor of luxury extension
• Typology of brand stretchings
• Leading a brand stretch
• Growth by stretching: the Mont Blanc case
• Stretching: preserve coherence, but be creative and unexpected
• Maintaining brand identity across sub-brands: the Armani case
• Building credentials in a new category: the Chanel case
• The risk factors of brand stretching
• Controlling the boomerang effect of brand stretching
• 08 Qualifying a product or service as luxury
• No product without service
• The luxury product and the dream
• Functionality and dreams do not follow the same economic models
• The luxury product is not a perfect product, but a sacred product
• Luxury product and competitive universe
• Luxury product and time
• Occasion of use and perception of value
• Lasting a lifetime... and beyond
• Prolonging the ecstasy of a privileged moment
• Adapting to its time
• Structuring the luxury range: how is the range of a luxury brand organized?
• Innovating through a new product range
• Don’t sacrifice the past to the future
• A mode of production as a lever of the imaginary
• The opposition between luxury and relocation
• Licences signal the departure from luxury
• The challenge of luxury services: creating the gap
• 09 Pricing luxury
• What about price elasticity?
• Increase the price to increase demand and recreate the distance
• What price premium?
• Fixing the price in luxury
• Managing the price over time
• No sales in luxury
• Price reductions
• The price and its communication
• The price is not publicly advertised
• The price must be sold
• Price: the two challenges of the luxury strategy
• 10 Distribution and the internet dilemma
• Luxury is in the distribution
• You sell to someone before you sell something
• It is the price, not the product, that is sold to the client
• The sales personnel should never earn direct sales commission
• Distribution shows that the brand dominates clients, but respects them
• Distributing is first of all about communicating
• Distribution should not only show off, but enhance the product image
• It is distribution’s job to communicate the brand’s price level
• A luxury purchase is a lengthy act
• Distribution is luxury’s weak link
• The choice of a new sales point cannot be delegated
• Distribution must manage rarity
• Distribution protects you from competition
• Luxury and mode of distribution
• Luxury and digital distribution (the internet dilemma)
• Luxury brands: when, what, and how to sell on the internet
• 11 Communicating luxury
• You don’t communicate to sell
• You communicate because you sell
• You don’t talk about money
• You communicate, you don’t advertise
• No personalities in the advertising
• The role of brand ambassadors
• Building the social driver of desire
• Permanently encourage word of mouth
• What balance should there be between local and global communication?
• The internet and communication in luxury
• The unique codes of luxury communication
• Making the brand’s visual language denser: the nine signatures of the brand
• Making the brand denser through tales, stories and rumours
• Adapting the communication register to the type of luxury
• The dialectic of the local and the universal
• 12 Financial and HR management of a luxury company
• Financial issues in luxury companies
• Luxury and profitability
• Globalizing
• Luxury, volume and profitability
• Managing the human capital in luxury
• Part 03 Strategic perspectives
• 13 Luxury business models
• Luxury products with a profitable core trade
• What are the pitfalls to avoid in this working model of a luxury product with a profitable core trade?
• Luxury products with a too-restricted core range
• The perfume business model
• The business model of luxury trades with very high overheads
• The ‘high-tech’ business model (highly innovative industry)
• Crises and luxury business models
• 14 Entering luxury and leaving it
• Wanting to be luxury is not enough: the conditions of luxury
• Why envisage a luxury strategy?
• Start small and become profitable
• Once profitable, grow quickly
• Acquiring an existing brand
• Departing from luxury
• The end of a luxury brand
• Taking a brand out of the luxury universe
• Leveraging the image in a low-cost strategy
• 15 Learning from luxury
• Luxury concerns all trades
• Understand the rules in order to adapt them
• How Apple follows a luxury strategy
• Luxury according to MINI
• Mixed strategies
• Managing a luxury strategy in B to B
• Luxury marketing as the future of traditional marketing
• What marketing issues of today could luxury marketing help to resolve?
• The Lacoste example
• Learning from luxury
• 16 Luxury and sustainable development: convergences and divergences
• Luxury and sustainable development
• Adopting the luxury strategy to foster sustainable development
• References
• Index
• Copyright