Everlasting Luxury


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Everlasting luxury is the very seed of luxury as we know it today and in which the evolution of the customer and market has generated a whole series of open-ended questions.
What are the implications of this change on the management of luxury products and services? Do the existing marketing tools still apply? And how does one go about founding and preserving a luxury brand? To this end this research sets out to investigate further and establish the boundaries of everlasting luxury, proposing possible answers to these questions.

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Everlasting Luxury

  1. 1. Claudia Chiari ®
  2. 2. Everlasting luxury The future of inaccessibility
  3. 3. Claudia Chiari Everlasting Luxury The future of inaccessibility Editrice Le Fonti - Milano
  4. 4. Tutti i diritti sono riservati. E’ vietata la riproduzione e la distribuzione anche parziale e con qualsiasi stru- mento del presente prodotto editoriale senza previo consenso scritto dell’Editore. Tutte le informazioni riportate sono state verificate nel migliore dei modi dall’au- tore e dall’editore. Tuttavia entrambi declinano la responsabilità per eventuali ed involontari errori. Le opinioni ed i punti di vista non necessariamente coincidono e rispecchiano quel- li dell’autore e/o dell’editore. ISBN 978-88-6109-066-8 Copyright © 2009 Editrice Le Fonti S.r.l. Via Olindo Guerrini, 14 20133 Milano Tel. 02.87386110 r.a. Fax 02.70635839 Email info@editricelefonti.it Stampa: Pronto Stampa, Fara Gera d’Adda, BG
  5. 5. We live in an age when unnecessary things are only necessities. Oscar Wilde, writer and poet The problem today is the idea of democratized luxury and I don’t believe that it is true luxury any longer. Tom Ford, designer
  6. 6. PREFACE Ever been in someones house or on company premises, in a bookstore or in the library and peeked at the books on a bookshelf and then asked yourself which one you would like to read? You quickly realise that your brain is teasing you because even though you know that you will never have the time to read all of the book you still feel overwhelmingly compelled to pick up the book and start reading. That’s what you are doing now! Was it the title, the graphics, the topic that stimulated your curiosity or was it something else? Whatever the reason you have undertaken a task that co- uld end up being irrational, most likely inconclusive and worse, possibly worth- less. This manuscript is rational in approach, conclusive in the sense it is up-to- date and since we are speaking of luxury, it has value. Incredibly though it is about luxury that could become worthless because we squeeze out so much value that it disappears. It is as if we love our heritage so much that we end up destroying the very ideals it represents and possesses. The author diligently asks what luxury really is and examines how luxury moves from inaccessibility to mass luxury. Consequently several major que- stions are raised about the management of a luxury brand, how customers per- ceive luxury, the needs that are satisfied, the luxury scenario and relative mar- keting, above all if, and should, a luxury product will stay inaccessible. The author takes fashion as the role model and pinnacle of luxury but al- so addresses other paradigms of luxury making this read equally applicable for any type of luxury, from mega yachts to jewellery. This is perhaps the most appealing aspect of the book for it demonstrates that intangibility and the ex- periential need to live together for a true luxury product to remain luxurious. Furthermore the book discusses the traits of luxury products, providing an identikit of the three types of luxury known today: Mass, Intermediate and Inaccessible luxuries. Last and perhaps, foremost, the author proposes three new models that ad- dress the positioning of luxury, its brand identity and accessibility. The author suspects that in order for luxury to be protected and desired we must tackle the question of accessibility and, where necessary accompany vii
  7. 7. Everlasting luxury. The future of inaccessibility our mass luxury product to its natural end, leaving true luxury inaccessible and everlasting. Prof. David Ward Senior Lecturer in Business Studies European School of Economics and Milan Politecnico Milan, Italy viii
  8. 8. ABSTRACT Luxury was once upon a time only in the hands of the very few and wealthy and therefore truly well out of the reach of the rest of society. It was also a means of distinction and classification, a modus operandi for setting oneself apart and hence the struggle was to ensure that this gap was maintained. Sin- ce then luxury has evolved into a desire for being ‘part of’, or belonging to or, as theorised by Maslow in 1943 it is direct consequence of mankind trying to satisfy a need of affection, and to this one could also adjoin affiliation and af- finity. In the 21st century luxury evolved into several forms or stratum of sump- tuousness, going from the original inaccessible luxury (as it is defined today) to luxury for the masses in which the society of consumerism sets out to ele- vate the customer to the lowest level of the luxury podium, that of mass lu- xury. The latest trend is not just to ‘appear’ or distinguish oneself but to gra- tify a psychological and emotional needs that stem from a pure experiential value. From the research conducted the echelon of society that seems to personify this trend are the so called baby boomers, i.e. those aged between 40 to 60 years of age, but more important is that the phenomenon is global. This has forced radical changes in marketing policy and practise, especially for luxury and lu- xury fashion goods. A brand, be it luxury or otherwise, is personified by a mix of rational and emotional content. A luxury brand cannot depart from rational and emotional, they must be blended to match the very essence of the degree of luxury. In this way a pro- duct that is classified as an inaccessible luxury will have a more emotional ra- ther than rational flavour while a massified luxury will have more rationality than emotionality. The bridge that links the two was found to be experiential, represented today by intermediate luxury. Male baby boomers in particular emphasise the search for self-actualisation (as described by Maslow), some- thing emotionally rational and the cases of Tom Ford and Azimut-Benetti me- ga yachts are major effigies of this today. Tom Ford and the focused brief case study discussed herein, sets out to pro- vide luxury clothing which is ‘emotionally rational’ with a strong emphasis on authenticity and extreme personalisation. Ford interprets personalisation ix
  9. 9. Everlasting luxury. The future of inaccessibility not just in terms of the product of inaccessible luxury but also in everything that is experienced with it, including the moment it is created, ordered and worn. This pushes for recognition or the ‘it is who I am (and what you are not)’ implies social belonging yet social distinguishment, both at the same time, it is the search for confirmation, consecration and completeness that open-up new markets such as China and India for inaccessible luxury. The Benetti group are the European leaders of their field and are witnes- ses to the incredible growth of the mega yacht industry. Benetti is also emble- matic of full customization, irrespective of price. Their diversification strategy is not just about product diversification but also about setting themselves apart from the competition, making them become the reference for inaccessibile lu- xury in the mega yacht business. The luxury market analytical tools available today, although tried and te- sted, have several limitations including the need to evaluate a luxury market that is changing and expanding and in which the customer is evolving too. For this purpose three specific models have been created by the author and discussed briefly in ‘Staying ahead of the competition…looking beyond the conclusions’. The first explains the evolution of luxury versus the tangible and intangible, the second and third express the emotional and rational to the de- gree of inaccessibility and a spectrum of luxury. In the first model inaccessible luxury and its characteristics remain immu- ne and podium set while intermediate luxury sooner or later dissolves into mass luxury that is then burn-out into the world of consumerism. The second model depicts a spectrum of luxury and helps establish just where the brand is located in terms of identity. In the third model the inaccessibility of luxury is measured by the degree or ratio of rationality and emotionality. The more a product is emotional and experiential the more likely it becomes less rational, appearing almost frivo- lous, meaningless and an exultation of rarity. Together with the final findings, these models project the research even further and provide further under- standing of the mechanisms that bring man to worship luxury, whatever its de- gree of uniqueness. x
  10. 10. CONTENTS Preface vii Abstract ix Chapter 1 - Overview and Analysis of the Fashion System & Luxury Market 1.1 The Meaning of Fashion 1 1.1.1 Modern Consumerism 2 1.2 Luxury Goods and their Characteristics 4 1.2.1 What does Luxury Mean? 5 1.3 The Consumer’s Behaviour 7 1.3.1 Motivation to Buy Luxury 10 1.4 The New Luxury Scenario 12 1.4.1 The New Needs of the Consumer 15 1.4.2 New High-End Customers 18 1.4.3 New Luxury Goods 21 1.4.4 What Makes a New Luxury Leader? 23 Chapter 2 - Marketing & Luxury Goods 2.1 The Marketing Concept 25 2.2 The Strategic Marketing Planning Process 26 2.3 The Marketing Planning Process 30 2.3.1 The Situation Analysis 32 The External Assessment 34 The Internal Assessment 37 Market Analysis and Marketing Research 39 2.3.2 Strategy Analysis and Choice 40 Assessing Growth Opportunities 45 2.3.3 Marketing Tactics 48 The Product Life Cycle’s Marketing Objectives 49 The Role of Marketing Communication 51 2.3.4 Marketing Controls: CRM 52 2.4 The Art of Luxury Marketing 53 2.4.1 Luxury Market Strategies 55 xi
  11. 11. Everlasting luxury. The future of inaccessibility 2.4.2 Luxury Marketing Mix 58 2.4.3 Luxury E-Marketing 60 Chapter 3 - Why Build a Brand? 3.1 Brand : Definition and Components 65 3.1.1 Brand’s Functions 67 3.1.2 Brand’s Competitive Advantages 68 3.2 Brand Equity Evaluation 69 3.2.1 Brand Equity Impact on Marketing 74 3.3 Brand Strategy and Implementation 75 3.3.1 Brand Extension 77 3.3.2 Brand Report Card 79 3.4 Luxury Brand Mapping 81 3.4.1 Brand Mapping Tools 83 Chapter 4 - Managing Luxury Goods 4.1 The Value of Luxury Goods 87 4.1.1 Luxury Target Market 88 4.2 Luxury Supply Chain 89 4.3 Luxury Brand Building 91 4.3.1 Luxury Brand Equity Model 92 Chapter 5 - Building a New Brand 5.1 Is Modern Luxury Really Luxury? 95 5.2 Tom Ford: An Example of Customer Oriented Brand 96 5.2.1 Customer Segmentation 97 5.2.2 A Functional Value Chain 98 5.3 Azimut-Benetti: Enjoying Unlimited Luxury 99 5.4 Conclusions 101 Chapter 6 - Staying Ahead of the Competition… looking beyond the conclusions Keeping Luxury Inaccessible 105 6.1 Tangibility of Luxury 105 6.2 Spectrum of Luxury: Linking Rational 106 and Emotional Value through the Brand 6.3 Brand identity of Luxury 107 xii
  12. 12. Contents Appendix A George Simmel: the First Analysis of Fashion 109 Appendix B Giacomo Leopardi: Dialogue 111 between Fashion and Death Appendix C Value Curve for the Typical Consumer Product 112 Appendix D From Marketing to Meta Marketing 113 Appendix E Getting into Consumers’ Heads 116 Appendix F From Input to Decision Stage 117 Appendix G Diamonds Online 120 Appendix H Tom Ford: the Man behind the Brand 121 Bibliography 123 xiii
  13. 13. Everlasting luxury. The future of inaccessibility Table of Figures Figure 1.1 Maslow’s hierarchy of 5 needs 9 Figure 1.2 Model of consumer’s behaviour 10 Figure 1.3 The last 3 decades of luxury 12 Figure 1.4 The next decade of luxury 13 Figure 1.5 Relationship between human needs and personal income 16 Figure 1.6 Per capita income’s growing 17 Figure 2.1 Planning, implementation and control process 27 Figure 2.2 The Business strategic process 29 Figure 2.3 Value delivery process 30 Figure 2.4 Marketing control process 31 Figure 2.5 Marketing environment 32 Figure 2.6 Internal marketing 33 Figure 2.7 SWOT matrix 35 Figure 2.8 Porter’s Five Forces model 37 Figure 2.9 Porter’s value chain 38 Figure 2.10 Market definition 41 Figure 2.11 Common market segmentation variables 42 Figure 2.13 The four action framework 44 Figure 2.14 Value network option for market vs. Strategic segment 45 Figure 2.15 The strategic planning gap 46 Figure 2.16 Ansoff’s product - Market expansion grid 46 Figure 2.17 Product life cycle 50 Figure 2.18 Marketing mix strategy 51 Figure 2.19 Organization charts 52 Figure 2.20 Key success factors for luxury goods 55 Figure 2.21 Main objectives of luxury markets 56 Figure 2.22 Marketing function roles 57 Figure 2.23 Luxury goods’ price 58 Figure 2.24 Dior.com fashion show online video clips 62 Figure 2.25 Coach.com online avatar product video 62 xiv
  14. 14. Contents Figure 3.1 Brand culture authors 65 Figure 3.2 The four components of customer value 67 Figure 3.3 Brand as relational area 69 Figure 3.4 The four components of brand equity 69 Figure 3.5 “Utility” approach to brand equity 71 Figure 3.6 Equity Engine by Research International 72 Figure 3.7 Equity Builder by Ipsos 72 Figure 3.8 Brand Asset valuator by Young & Rubicam 73 Figure 3.9 Brand Equity model by Kevin Lane Keller 74 Figure 3.10 Winning Brands by A. C. Nielsen 74 Figure 3.11 Brand value building 75 Figure 3.12 Brand and marketing impacts on sales 76 Figure 3.13 Brand strategy design 77 Figure 3.14 Brand equity goals 78 Figure 3.15 Clothing brand mapping 83 Figure 3.16 Interventions on image and purchasing behaviour 85 Figure 4.1 Consumerism’s effects 87 Figure 4.2 The categorisation of luxury 89 Figure 4.3 Competitive advantage 91 Figure 4.4 Brand-promise relation 92 Figure 4.5 Luxury goods’ brand equity model 93 Figure 5.1 Interior view of the Tom Ford store in New York 96 Figure 5.2 Steel Line Benetti 99 Figure 6.1 Luxury market shift 106 Figure 6.2 The spectrum of luxury brands 107 Figure 6.3 Brand identity 107 Figure A.1 Georg Simmel 109 Figure B.1 Giacomo Leopardi 111 Figure C.1 Value curve showing the contribution 112 of recycling technology Figure D.1 The meta marketing framework 114 Figure D.2 Consumer driven innovation 115 Figure H.1 Tom Ford 121 xv
  15. 15. Everlasting luxury. The future of inaccessibility Table of Tables Table 1.1 Definition of luxury (USA data) 6 Table 1.2 Words that describe luxury 7 Table 1.3 Influencers on luxury consumers purchases 14 Table 1.4 Total HNWI estates 19 Table 1.5 HNWI in the world 19 Table 1.6 American luxury class 19 Table 1.7 Driving luxury by generation 20 Table 1.8 A new division of markets 22 Table 2.1 4Ps and 4 Cs 49 Table 2.2 Another “P” for luxury marketers 60 Table F.1 Example of IFE matrix 117 Table F.2 Example of CPM 118 Table F.3 Example of QSPM 119 xvi
  16. 16. Everlasting luxury is the very seed of luxury as we know it today and in which the evolution of the customer and market has generated a whole series of open-ended questions. What are the implications of this change on the management of luxury products and services? Do the existing marketing tools still apply? And how does one go about founding and preserving a luxury brand? To this end this research sets out to investigate fur- ther and establish the boundaries of everlasting luxury, proposing possible answers to these questions. Claudia Chiari, born in Arezzo, graduated with a first-class degree in Law from the University of Florence. She began her professional career in one of Arezzo’s most important business consultancy firms, where she is still on the Board of Directors. Later she moved to London and completed an MBA, speciali- sing in marketing, at the European School of Economics, an environment in which she was constantly exposed to nationa- lities and cultures from all over the world. There she experien- ced first-hand the importance of cultural exchange and team work that allowed her to evolve both professionally and individually. She learned new skills such as working in multi-cultural teams, ‘glocal’ management issues, decision-making, planning and communication styles. Milan was the next stage of her professional development where she became invol- ved in university and entreprenuerial projects. An initial predilection toward the luxury sector was further intensified through the various seminars, conferences and events that she took part in, with as much focus on editorial production and orga- nisation as on magazines and web portals. A passion for communication led her to expand her knowledge of the publishing sector and in 2008 she was appointed as the editor and head of external relations of Editrice Le Fonti, a leading publisher for the financial, legal and art sector in Italy. She has recently taken on the role of sales and marketing manager in a German mul- tinational company. Here the young, dynamic and international environment is already offering her fur- ther opportunities for professional development and consolidation. € 40,00