Luxury Brand Marketing
Global Senior Executives Forum
Idris Mootee
CEO Idea Couture Inc.
Cologne 2005
© Idris Mootee 2004

What is luxury brand marketing?
© Idris Mootee 2004

What’s ‘luxury’?
© Idris Mootee 2004

Definitions….
If everyone owns a particular brand….it is by definition not luxury
Luxury is about the quantity or a vast array of expensive goods
Luxury is partly derived from technical superiority
Luxury is partly derived from unique craftsmanship
Luxury is to project certain social status or wealth
Luxury is satisfy certain role-playing aspects
Luxury is to satisfy an emotional desire with subjective intangible
benefits
© Idris Mootee 2004

Brand marketing in the luxury business is tricky—it means
(sometimes) creating desire for things that no one really
needs and charging a lot of money for them.
© Idris Mootee 2004

Is economic terms, luxury products are those who can
consistently command and justify a higher price than
products with comparable functions and similar quality.
In marketing terms, luxury products are those who can
deliver emotional benefits which is hard to match by
comparable products.
© Idris Mootee 2004

One challenge is whether a niche player can move
outside of their niche, or expand their niche without
destroying their brand in the process
Another challenge is once it can successfully move out
of the niche, how far can it goes until it becomes mass.
Is there something call “massclusitivity”?
© Idris Mootee 2004

Is there a winning formula?
© Idris Mootee 2004

LVMH CEO Bernard Arnault has a winning formula:
Sharply define the brand identity—or \"DNA,\" as he puts
it—by mining the brand's history and finding the right
designer to express it; tightly control quality and
distribution; and create a masterful marketing buzz.
© Idris Mootee 2004

When H&M brought in Chanel designer Karl Lagerfeld
to dream up a collection. Customers formed huge lines
waiting for H&M stores to open, and many items sold
out before lunch. They then did it again with Stella
McCartney.
© Idris Mootee 2004

Examples include Audi, BMW and Mercedes. These
are the leaders of the luxury automobile world, playing
mainly in the $40-$100k price range. The question is
how serious is the issue of brand dilution ?
© Idris Mootee 2004

Other examples in fashion include LV, Gucci, Coach
and Prada etc.. These are the leaders of the fashion
and leather goods world, playing mainly in the $1,500
plus price range. The question is how serious is the
issue of brand dilution ?
© Idris Mootee 2004

“The market dynamics have changed. It used to be
clearly defined by how much you can afford. Before, if
you belonged to a certain group, you shopped at Wal-
Mart and bought the cheapest coffee and bought the
cheapest sneakers. Now, people may buy the cheapest
brand of consumer goods but still want Starbucks coffee
and an iPod.”
Idris Mootee
© Idris Mootee 2004

Massification of Luxury Brands is happening across a
broad set of categories. Almost every marketer needs to
think whether they have a Luxury Market Strategy in
place. The big question is - who can effectively capture
this segment in your category?
© Idris Mootee 2004

We have a surplus of similar companies, employing
similar people, with similar educational
backgrounds, working in similar jobs, coming up with
similar ideas, producing similar things, with
similar prices and similar quality.
- Kjell Nordstrom and Jonas Ridderstrale
Funky Business
© Idris Mootee 2004

We also have a surplus of similar brands, with
similar similar marketing
brand attributes,
messages, making similar brand claims, with
similar quality, selling at similar prices.
Welcome to the Surplus Economy!
© Idris Mootee 2004

What’s causing the shift in consumer behavior
towards luxury ?
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McDonaldization and Wal-Martization is everywhere.
Individualism and diversity are replaced by efficiency and
social control. The principles of the fast food restaurant
are dominating our everyday lives.
© Idris Mootee 2004

Rocketing is getting more common. More people are
spending a disproportional amount of in a category of
great meaning to them. In order to trade-up, they also
downsize to maximize.
© Idris Mootee 2004

TV news are increasingly depressing. People are taking a
lot of stress these days. 24/7. Thanks to CNN and the
information technology revolution, we’re bringing a lot of
undesirables into our homes.
© Idris Mootee 2004

For the first time drastic increased of liquidity in luxury
goods. The distribution or redistribution of these products
is greatly expanded……. the luxury long tail.
© Idris Mootee 2004

Towards a relaxed and uncluttered lifestyle. Middle-aged
yuppies once surrounded by too much stuff acquire over
the years, so a strong desire to make life simply life.
© Idris Mootee 2004

As wealthy consumers get richer, older and wiser, they
are increasingly foregoing ownership of luxury assets,
while still getting what they want slice-by-slice through
membership programs. Many will prefer ‘pay-as-go-
luxury' as the way ahead.
© Idris Mootee 2004

Bag Borrow or Steal is an online co. that works like a
Netflix for handbags: Customers pay a monthly fee for
access to a collection of authentic designer handbags.
Membership levels ranging from Trendsetter ($19.95) to
Diva Deluxe ($174.95). Members may borrow the bag for
as long as they like. Option to buy the bag at a
discounted price is available.
© Idris Mootee 2004

What is happening is the developed economies are
going through a dematerializing process, one
in which intangibles such as design, creativity, meanings
and entertainment play more staring role than
manufacturing.
© Idris Mootee 2004

The massification-of-luxury players
Luxury-by-Birth
Luxury brands remain true to their
heritage and stay expensive and
exclusive
State of the art Niche market players
Luxury brands broaden
technologies position position themselves as
markets and develop
as a form of luxury luxury brands
multiple brand extensions
Popular brand names Popular brand names
develop/acquire up-market using ‘luxury’ as a form of
brands differentiation
Value–at-Heart
© Idris Mootee 2004

The massification-of-luxury brands
Super Luxury
Luxury
Ultra Premium
Near Luxury
Super Premium Affordable Luxury
Premium
Upmarket
© Idris Mootee 2004

The value shift
YESTERDAY TODAY
Brand Brand
Leadership Leadership
Make More Money
Make More
Money
Cost Leadership
Cost Leadership
© Idris Mootee 2004

In older cultures, the limited production capacity of the
economy sharply reduced aspirations to material comfort.
In this surplus economy, much greater material
satisfaction lies within the reach of even those of modest
means. Thus a PRODUCER culture becomes a
CONSUMER culture.
© Idris Mootee 2004

Now we all fit into brand communities, no longer divided
by “wealth, birth, political eminence” but by consumption.
For marketers, brands and products now need to be
positioned to be bought, not made.
© Idris Mootee 2004

Living is more of a question of what
one spends than what one makes.
- Marcel Duchamp
© Idris Mootee 2004

For many, what you buy is now more important than
what you make, luxury is not a goal anymore, for
many it is simply a necessity.
© Idris Mootee 2004

In 1996 the German journal ‘Parfumerie und Kosmetik’
(Perfumery and Cosmetics) published an article with
heading “Fragrance, Prestige or Mass – The end of the
beginning?”. The article dealt with the blurring of the
boundaries between prestige and mass perfumes. Is that
happening?
How does that impact your industry?
© Idris Mootee 2004

Prada is suffering from the same misfortune as Burberry:
the 'curse of chav'. Top clubs in Manchester have banned
people wearing Prada hi-top trainer-style shoes from entry
because they have become associated with local street
gangs.
© Idris Mootee 2004

Marketing executive survey
Do you think that this massification of luxury trend creates more
opportunities than threats?
Luxury goods 85%
Automobile 79%
Travel and hospitality 68%
Personal Care 62%
Sporting Goods 51%
Watches and jewelries 45%
Source: Survey conducted between March-April 2004 with 250 senior marketing executives conducted by Strategy Architects Inc/ INRA
© Idris Mootee 2004

Marketing executive survey
Do you agree that this massification of luxury is a major consumer
behavioral shift and not a short term fad?
% YES
87%
Luxury goods
92%
Automobile
74%
Travel and hospitality
Personal care 67%
Sporting Goods 45%
Watches and jewelries
67%
Source: Survey conducted between March-April 2004 with 250 senior marketing executives conducted by Strategy Architects Inc/ INRA
© Idris Mootee 2004

Marketing executive survey . . .
Do you think that your organization are poised to take advantage of
this shift?
Luxury goods 53%
Automobile 86%
54%
Travel and hospitality
55%
Personal care
42%
Sporting Goods
43%
Watches and jewelries
Source: Survey conducted between March-April 2004 with 250 senior marketing executives conducted by Strategy Architects Inc/ INRA
© Idris Mootee 2004

Marketing executive survey . . .
What do you think are the key challenges to capture these opportunities?
Brand dilution 76%
Customer segmentation 74%
Market definition 63%
Senior mgmt support 43%
41%
Product innovation
34%
Market validity
Source: Survey conducted between March-April 2004 with 250 senior marketing executives conducted by Strategy Architects Inc/ INRA
© Idris Mootee 2004

The brand pyramid
Massification of
Pure Artist, Creator and Unique
Creation. Not Scalable Business
Luxury Brand
The
Luxury
Brand
Exclusive, Prestige Image,
Highest Quality and Service.
Professional Management The Leading
Brand
Mass Produced, Best Quality
in Category. Enjoy Market
The Quality Brand
Share Leadership
Mass Produced, Good
Overall Price/Value Brand /
The Better Brand
Image Equation
Luxurification of
Constantly Under Cost Pressures,
Just Another Brand
Unable to Build Brand Equity, Usually
Mass Markets
Outside of the Top Three in Market
Share Leadership
© Idris Mootee 2004

Strategic response to the luxury markets (Traditional)
high
Price and Exclusivity
Special
Limited
Editions
Extended
The Luxury Product
Core Range
Low
low Purchase Frequency high
© Idris Mootee 2004

Strategic response to the luxury markets
The Distinctive
high
Luxury
Price and Exclusivity
Experience
Extension
The Essential
Luxury
The Affordable
The Luxury Luxury
Core
Low
low Purchase Frequency high
© Idris Mootee 2004

Many companies, while delivering excellent products,
create great advertising, sometimes does not have any
influence over the customer experiences. But as product
differentiation continues to blur, the smarter luxury goods
and services providers will start taking of what Neiman
Marcus, Ritz-Carlton, Maybach, Giorgio Armani and
Apple already know - that the customer experience is the
most critical aspect of the luxury business model.
© Idris Mootee 2004

Today mainstream marketing is too obsessed
with rigor, quantification and scientific rectitude
that it has totally lost sight of the most important
part of marketing……
imagination
magic
& mystery
© Idris Mootee 2004

Marketing in the age of accelerated meaning
The consumption of symbolic meaning through the
use of marketing communications and consumer
communities as a cultural commodity, provides the
individual with the opportunity to construct, maintain
and communicate identity and social meanings.
© Idris Mootee 2004

Most of us feel an occasional growing emptiness
somewhere in the space between the heart, mind and
groin. Luxury items provide us with some short term
relief to these emptiness….much like Tylenol does to
our headaches and Viagra to ED.
© Idris Mootee 2004

and therefore …….
Marketing becomes the ultimate social practice of
postmodern consumer culture, it now plays an important
role in giving meaning to life through consumption.
© Idris Mootee 2004

Evolution of consumerism
It all begins with a need and then feeling anxious about
resolving it. Then the experience ends, if successful,
with a feeling of relaxation or satisfaction. It does not
really satisfy the need, the process is then repeated
until it abates. We judge the act by the experience. We
have gone from product to process, from problem
resolution to emotion seeking, from object to
experience.
© Idris Mootee 2004

We are live in a world of intrusive technologies. And
technology accelerates change. Technology also allow
manipulation, giving us a false sense of reality and
shortens product life-cycles. Even our self-identities
become more fluid. Majority of us allow ourselves to be
defined by an external world that is morphing at rapid
speed. Technology will soon be able to allow us to enter a
parallel world where we can manifest our self-identities. In
3 years, over 50% of this world population will have exist
as an avatar of some form that resides in a digital space.
Implications?
© Idris Mootee 2004

Implications: We’ll be more and more focused on desires
and gratification. Not so much objects, but of experiences
that provide sensory gratification. The future society will
be interested on sensory gratification (pleasure, sensation
and comfort). Marketing will become more intrusive and
manipulative.
© Idris Mootee 2004

Concepts for explorations
Real versus the Imaginary
Material versus the Symbolic
Social versus the Self
Desire versus Satisfaction
Rationality versus Irrationality
Materialism versus Spiritualism
© Idris Mootee 2004

How real is the unreal?
Real vs. Imaginary
Consumption sometimes operates at a level of the
imaginary, but it can also have real effects in
facilitating the construction of self-identity.
© Idris Mootee 2004

Selling illusions ?
Material vs. the Symbolic
Just as a product fulfills its ability to satisfy a mere physical
need we enter the realm of the symbolic, and it is symbolic
meaning that is used in the search for the meaning of
existence. We become consumers of “illusions”.
© Idris Mootee 2004

Our Possible Selves?
Social vs. Self
The function of symbolic meanings of products operate in
two directions, outward in constructing the social world –
social-symbolism – and inward towards constructing our
self-identity: self-symbolism. In other words, using products
to help us become our “Possible Selves”.
© Idris Mootee 2004

Selling the Unobtainable?
Desire vs. Satisfaction
Advertising often provides gratification and recodes a
commodity as a desirable psycho-ideological sign. In fact,
it feeds the desire to sometimes the unobtainable. Visuals
are powerful because they never satisfy. Meaning is
created through continuous search for links between
identity (social) and the self.
© Idris Mootee 2004

Solution for the Empty-Self?
Rationality vs. Irrationality
The expansion of “wants” reduces our choice to “want
not” and sometimes makes the very idea of
rational choice become meaningless. We’re in
the era of the “empty-self” in which alienation can be
solved by the “lifestyle” solution in which we construct a
“self” by purchasing even of limited rationality.
© Idris Mootee 2004

The world of plenty
Materialism vs. Spiritualism
We use all kinds of tools everyday. We are tool users and tools are
not the end but he means. So materialism does not crowd out
spiritualism; spiritualism is more likely a substitute when objects are
scarce. When we have fewer things, we make the next
world luxurious. When we have plenty, we enchant
those objects around us.
© Idris Mootee 2004

Massification of luxury goods - Impact on industries
Sneakers
Highly Polarized Sports Gear
Market and Diminishing DVDs
Mid-Market
Toys TVs
Chocolate
Handbags
Watches
Coffee
Ice-Cream We have no choice
but to pay more for
Tea
premium brands
Automobile
Power Tools Take Home
Cosmetics
Meals Personal Care
Digital
Bakeries Camera
We have no reason
Kitchen Mineral
to pay premium
Appliances Water
Cooking Airline prices as there are
Growing Mid-Market
Utensils plenty of choices
Demand for Near-
Home
Luxury Goods
Furnishing
Low High
Speed and Intensity of massification © Idris Mootee 2004

Value drivers of the fashion and
luxury goods industry today
Portfolio management – strategic focus
Emerging markets – land grabs
Channel optimization – retail transformation
Dealing with counterfeit – technological solution
Push advanced functionality – technological innovation
Technology-enabled creativity – design innovation
© Idris Mootee 2004

LVMH Brands EBIT (2004)
Euro (m) Sales EBIT EBIT margin
LV 3056 1301 45%
Fendi 211 -30 -14%
Donna Karan 265 0 0%
Other 830 -32 -4%
Portfolio Management
Portfolio management – strategic focus vs. diversification
Star performers usually contribute average 42% of total profits
It is rare for any holding company to have more than one star
Gucci Group (PPR) 8 out of the 10 brands were losing money in
2004
© Idris Mootee 2004

Emerging Markets
A study by Merrill Lynch has shown that China and Japan will
dominate more than half of the luxury fashion market in 10 years'
time. Thereby the two Far East superpowers will surpass Europe
and the US.
Merrill Lynch revealed that China currently has an 11% stake in the
EUR82 billion luxury fashion market. By the time 2014 rolls around
this market will have grown to EUR133 billion, and China will have
a 30% stake in it. This will leave Japan in second place with 21%,
with Europe and the US following in third and fourth place with
20% and 17%.
© Idris Mootee 2004

Sales per SQM 2003/2004
60000
50000
40000
30000
20000
10000
Euro LV Hermes Dior Gucci Others
Channel Optimization
Channel optimization – retail transformation
Transform a franchise to retail makes economic sense since it
allows capturing additional gross profit
Technology allows the creation of virtual customer experience
and new channel
© Idris Mootee 2004

Idris Mootee
Danke
Gracias
Merci
Thank you
Grazie
Arigatou-Gozaimasita
Idris.Mootee@Blastradius.com or
imootee@highintensitymarketing.com
© Idris Mootee 2004