Luxury Institute News

May 9, 2012

WCW Management Consulting Trends: The DNA Of Luxury Branding

By James D. Roumeliotis
Whitefield Consulting Worldwide
May 9, 2012

Open any quality fashion or lifestyle magazine, and you will see how brands conceptualise and package luxury. The hype is deafening, and in reality can be quite confusing. Everyone wants “luxury” brands, and from a marketing point of view defy sales trends and seem recession proof.

As consumers, we want to be made to feel special. Definitions of “luxury” can vary enormously and depend on who you ask and in what context. The term “Luxury” has never been something easy to define. It is in my view, a mysterious and elusive concept. Studies highlight that no one is immune and when properly executed makes products and services highly desirable by broad market segments.

To put things into perspective, I will discuss the nature of luxury, and how luxury and premium brands differ in the marketplace although both types of products and services can be targeted to similar audiences.

Why Luxury Brands?

The first key point to understand is that people buy luxury brands for a multitude of reasons. In general these brands are expensive and are targeted to high net worth individuals and people who have high levels of DPI. The desirability to possess is based on the consumers need for high quality, exclusivity, craftsmanship, precision and innovation. They involve issues of self perception and self worth. These underlying reasons lie at the subconscious level of the individual and include points such as peer recognition and approval, status, and the envy one’s inner circle.

In the services sector such as in tourism and business travel think 5-star hotels and resorts. We all appreciate the ambiance and “feel good” experience. In medicine, plastic surgery can offer illusions of “eternal youth” and enhanced aesthetics.

Luxury products can be broken down into three categories:

Prestige brands such as Louis Vuitton, Rolex, Mercedes-Benz and Cartier represent a highest form of craftsmanship and command a loyal consumer following that is not affected by trends. Due to their pedigree, they are well established as status symbols. For example, If Daniel Craig or George Clooney wear an Omega watch in an advert or film, sales immediately spike.

Premium brands are those brands like Polo Ralph Lauren, Calvin Klein and Tommy Hilfiger that aspire to be luxury and prestige brands but their marketing is geared more to, as a term, an affluent mass market or mass-luxury brands.

Fashion brands on the other hand are those that address the masses and whose designs can be seasonal. Call them the “hot trends” or “fads” of the immediate moment.

It’s foolish for a company to think that by simply launching a product with a “luxury” label attached will make their targeted market flock to it. It takes diligent planning, execution, clever strategic marketing and PR buzz alongside ambiance and finesse. To be perceived as unique, luxury products and services should have an aura of mystery surrounding them. Oddly enough, the more ubiquitous the product and the more acessible, the less the “mystery” concept holds true.

The Dazzle Factor

A brand that is committed to be a player in the luxury domain should endeavor to build long-lasting loyalty by creating products that resonate with customers on an emotional level. It’s what we call the “Dazzle” factor.

Glamour is another important ingredient. It is the impression of attraction or fascination that a particularly luxurious or elegant appearance creates – an impression which is better than reality.

Today, consumer purchase decisions are increasingly driven by consumers’ hearts. With ambiance marketing, a custom designed attractive setting – yet alluring with captivating style, invites customers to truly feel the brand experience by adding character. This is accomplished by connecting the emotions to a product or service, and infusing it with a tangible and intangible essence that remain in the customers’ minds.

The ambiance you create is one of your best marketing tools. The aesthetic appeal to human senses, the feel of your business and the brand you create is your image. Along with great service, it is one of the most important reasons customers will choose to do business with you on frequent basis.

It’s natural to expect luxury brand purchasers accustomed to being pampered. VIPs as they’re known to be labeled, they’re also used to having access to the hottest entertainment events, parties and sports venues. A brand known to deliver on those type of unique experiences is quintessentially, a world leading private members’ club, which has a global concierge network that provides such a service 24 hours a day, 365 days a year including specialist advice, insider access and benefits to absolutely anything you can think of, from property, art, bespoke fashion and fine wine, through to luxury travel, security, event production and publishing.

Luxury vs. Premium

Luxury is self expression, an exceptional experience and a feeling of sense of emotion. There is also a difference between a “luxury” and a “premium” product but they can be both – as in a tailored made fine wool suit for example by Camps de Luca in Paris.

Luxury product pricing is related to scarcity, brand and storytelling. Premium goods, on the other hand, are expensive variants of commodity goods – pay more, get more. It’s the craftsmanship and quality along with the pedigree of the product. Plenty of brands get in trouble because they can’t figure-out which one they represent.

The Impact Of Niche & Lifestyle

What distinguishes luxury automobiles from others are the so-called “bells & whistles, comfort, additional safety features, leather heated seats, ergonomics, styling and performance to name a few. Besides the car itself, the overall awe-inspiring experience is crucial. From the moment one purchases the vehicle and during time of servicing.

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. BMW stands for fine engineering and “The Ultimate Driving Machine”. Those principals have maintained consistency over time and across its entire range, which guarantees its authenticity, its attraction, its mystique, as well as its spark.

With women’s designer handbags, it’s the craftsmanship including a confidence booster to its owner as the bag screams to the world, you are unique. The Sophia Coppola collection at Louis Vuitton and the “Birkin” bag at Hermes are notable examples with the latter design house producing limited quantities to generate and guarantee exclusivity through scarcity, i.e. limited editions.

As for high-end condominiums, it’s the sought after location, the trendy architecture/design, its facilities and overall experience. It’s the impression that it’s irreplaceable. Selling only “the” amenities is kind of outdated.

People want more than that. They want to feel they own something that has a personality and a story. That means more than just the usual appliance upgrades or adding a health club. That said, people are looking for self-definition and a sense of belonging when choosing to live in a certain property. The “Trump” name is renowned for its cachet with its properties as they redefine luxury. From the elegant design of the residential units and spectacular lobbies, to the distinguished quality of services and amenities that are available around the clock for its residents, the organization has a reputation for detail.

Differentiating “Nouveau-Riche” from “Old Money”

“Old Money”, with persons from families who have been wealthy for multiple generations, has its established habits and favored brands. It’s deep-rooted and less concerned with peer pressure or living up to the Jones’s.

Unfortunately, research is showing that “old money” is not only becoming scarce but also buying less. For this reason, to survive and grow, luxury brands should be focusing their marketing efforts on the “Nouveau-Riche”. This term is used to identify people who have acquired considerable wealth within their generation. The newly rich spend money to assert their freedom and self-expression and while doing so, enjoy flaunting their success, whereas “Old Money” behaves more conservatively.

Its More Than “Packaging & Presentation”

It’s not enough to simply introduce and sell a luxury brand surrounded by a fancy store with design inspired display cases. The attitude, product knowledge and overall delivery/presentation of the product by the sales consultant/brand ambassador all play an equally important role.

A study by The Luxury Institute finds that Burberry and Bottega Veneta excel far better than other companies at having enthusiastic brand ambassadors in their stores who are interested in helping customers. This was one of the key findings of the report titled, “Leading edge insights into the world of the wealthy.”

Mystery shoppers commissioned by The Luxury Institute said that the layout, location and atmospheres of the Burberry and Bottega Veneta stores were what clients appreciated most.

“A customer-centric culture is something that is a self-reinforcing system that creates consistently extraordinary customer experience,” said Milton Pedraza, CEO of The Luxury Institute, New York.

“Service values, service standards and education on operational and cultural functions need to be in place.” He further added, “Luxury brands should have a set of service values. They need to educate and hire the right people. Whenever a new store opens, brands need to make sure they test employees for personality. They need to be educated in the customer experience and the culture of the brand, not just how to work a register,”
Furthermore, he stated, “We know every luxury brands CEO gets luxury brand customer service”.

Exclusivity is Key To Branding

Classic brands such as Coca-Cola and Pepsi-Cola put emphasis on their differentiation with their competitors. They specify its positioning then convey it through its products, its services, its price, its distribution and finally through its communication.

With genuine luxury brands, it’s not the same approach. Being unique is what counts, not any comparison with a competitor. JN Kapferer and V. Bastien, authors of the book, “The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands”, succinctly state that “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 colors’, suffused with the culture of the Mediterranean; it certainly is not concerned with its positioning with respect to this or that established designer.”

The role of advertising a luxury product or service is not to sell at all. Unlike traditional ads where the text makes the sales pitch, with luxury adverts, it’s about refinement. A large photo of the product in a lifestyle setting is displayed along with a brief story line with some mystery.

When you visit a Porsche dealer, the sales consultant will talk to you about racetracks, describe road-holding capabilities, build-up a fascinating story – after which time he/she will tell you about reliability, and the “technical” details.

To be successful in luxury marketing today, marketers should target and combine experiential marketing to attract and retain customers with emphasis on the individual lifestyle.

The Polo Ralph Lauren corporation, which was named Luxury Marketer of the Year for 2010, knows a thing or two about successful luxury marketing. The runner-up was Louis Vuitton, and third-place was awarded to Burberry.

The accolade was won on the strength of an integrated strategy which included interactive marketing while continuing its rich and distinct brand story in print and beyond – all leading to double-digit growth in 2010.

“Creating a luxury brand is one thing, but maintaining its marketing aura across good times and bad, traditional media and new, takes genius and Ralph Lauren,” said Mickey Alam Khan, editor in chief of Luxury Daily, New York. “Ralph Lauren’s marketing has become a byword for excellence with consistent creative messaging and effective call to action in an era where luxury brands struggle to retain their mystique,” he said.

Experience Is Fundamental

Luxury isn’t about price anymore. It’s about spending on brands that are authentic and meaningful through function, design, intrinsic value received versus others in the category.

Luxury products must provide the right experience. Sophisticated customers want products that dazzle their senses, touch their hearts and stimulate their minds – which they can relate to and can incorporate into their lifestyles. The degree to which a company is able to deliver a desirable customer experience is vital.

While public relations and advertising in selected media has been the mainstay, astute marketers have also adopted prestige event sponsorship which offers exposure to the right targeted audience. Mercedes-Benz with its New York Fashion Week is one such example.

Craftsmanship is making a comeback too, as people look for better, longer-lasting things. In the past years it was about “collecting” quantities of things, but now, its about exclusivity and quality things, which please. Design must be timeless for longer visual enjoyment.

At this crossroads, “luxury” and “premium” meet at the junction in unity of purpose.

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