Fundamental of luxury-Chapter 2.pdf

Fundamentals
of luxury
markets
Overview of the global luxury market
How luxury companies are operating

PARIS SCHOOL OF BUSINESS
TO BE A LEADER IN LUXURY MARKET
LUXURY IS ‘SUPERLATIVE’, NOT ‘COMPARATIVE’.
• Luxury is a non necessity made desirable, it sells promotion emotions
(self elevation, pleasure, recognition), not prevention emotions (risk
reduction, absence of problem and discomfort).
• Not only are traditional marketing techniques not suited to luxury, they
can in fact be positively harmful to it.
• The luxury strategy was originally developed for the broadly defined
luxury market.
2

FORGET ABOUT ‘POSITIONING’
• Positioning is the heart of every brand.
• Companies should convey their position through their products, their
services, their price, their distribution and their communication.
• In luxury makes the bold statement “this is what I am,” not “that
depends”– which is what positioning implies.
• Luxury is identity not positioning.
3

FORGET ABOUT ‘POSITIONING’
LUXURY IS THE IDENTITY
• Luxury identity gives a brand that particularly powerful feeling of
uniqueness, timelessness, and the necessary authenticity that helps
give an impression of permanence.
• Luxury 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 be always worrying
about where it stands in relation to a competitor.
4

DOES YOUR PRODUCT HAVE ENOUGH FLAWS?
• Luxury is on the top regarding the price and quality.
SEIKO
HERMES
5

DOES YOUR PRODUCT HAVE ENOUGH FLAWS?
• Luxury products may be less than perfect.
• In the world of luxury, the models and the products must have character
or personality.
• Luxury brands are not interested in being the leader in utilitarian or
functional comparisons –primarily they are hedonistic and symbolic.
• So worry less about eliminating flaws and more about staying true to
what the brand represents
6

DON’T PANDER TO YOUR CUSTOMERS’ WISHES.
• In traditional marketing, the customer is king while this is not the case
for the luxury product.
• WHILE, luxury companies care about its clients and listen to them.
However, it should do nothing that threatens its identity.
• A luxury brand has to maintain a consistency over time and across
its entire range, which guarantees its authenticity, and therefore its
attraction.
7

DON’T PANDER TO YOUR CUSTOMERS’ WISHES.
• This relationship with the client is typical of postmodern luxury and
dates back to the 19th century.
• The luxury brand, 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 them too much.
• No longer was the craftsman prepared to go cap-in-hand to visit the
client; instead, people went to them to see their latest collections, their
new creations.
8

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.
• WHILE, luxury companies try to make a brand more relevant is to
dilute its value, because not only does the brand lose some of its
unique features.
• Brand growth is achieved by penetrating new countries, not new
customer segments.
9

DON’T RESPOND TO RISING DEMAND
The prime objective of traditional marketing is volume growth.
• It 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.
• With sufficient volume, the business can work with small margins and
still make money. This is the essence of the mass marketing model.
• At Ferrari, production is deliberately kept to fewer than 6,000 vehicles a
year – rarity value sells.
• 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.
10

DOMINATE THE CLIENT
• Luxury is a consequence of meritocracy.
• A certain distance is preserved that is not supercilious, but nevertheless
maintains an aura of mystery.
• Luxury is the domain of culture and taste.
• The luxury brand should be ready to play this role of advisor, educator
and sociological guide.
11

MAKE IT DIFFICULT FOR CLIENTS TO BUY
Time is a key dimension of luxury
• The luxury brand is something that has to be earned.
• The greater the inaccessibility – whether actual or virtual – the greater
the desire.
• Luxury has to know how to set up the necessary obstacles to the
straining of desire, and keep them in place.
• It’s quite natural: just as actual shortages stand in the way of growth, so
the absence of rarity leads to the immediate dissipation of desire, and
so to the disappearance of the very waiting time that sustains luxury.
12

PROTECT THE BIG FROM THE SMALL
• Modern luxury works on the open–close principle. Too much ‘open’ is
harmful to the brand’s social function.
• In practice that meant that the brand became segregationist and forgot
all society’s democratic principles.
• Advertising and promotion is for all, but public relations are ultra-
carefully targeted, like the CRM for the privileged.
13

THE ROLE OF ADVERTISING IS NOT TO SELL
• In traditional marketing the first thing to be done is to come up with a
sales proposal, to have a unique selling proposition – the text is there to
make the sales pitch.
• In luxury, the dream comes first. The explanations of the salesmen are
simply post-rationalizations.
• The head of BMW in the USA : “My job is to make sure that the 18-year-
olds in this country decide that, as soon as they have the money, they
will be buying a BMW. I have to see to it that when they go to bed at
night they are dreaming of BMW.”
14

COMMUNICATE TO THOSE WHOM YOU ARE NOT
TARGETING
• Luxury has two value facets – luxury for oneself and luxury for
others.
• To sustain the latter facet it is essential that there should be many more
people that are familiar with the brand than those who could possibly
afford to buy it for themselves.
• In traditional marketing, the keyword is efficiency, but over and above
efficiency there has to be a return on investment.
• It is essential to spread brand awareness beyond the target group.
15

HIGHER PRESUMED PRICE
• It is a telling fact that advertisements for luxury products often show
only the product, without any blurb, and certainly no prices.
• As a general rule, the imagined price should be higher than it really is.
It’s the opposite in traditional marketing.
• In luxury, when an imagined price is higher than the actual price,
that creates value.
16

EMBRACE DIGITAL MARKETING
TAKE ADVANTAGE OF VISUAL SOCIAL NETWORKS
visual social networks like Pinterest represent a huge opportunity for luxury
brands to raise brand awareness and advocacy.
17

BUILD A WEBSITE THAT COMBINES STYLE, USER
EXPERIENCE, AND FUNCTIONALITY
Generally speaking, luxury brand websites are very stylish, but perform
poorly when it comes to user experience and functionality.
18

USE BRAND HERITAGE TO TELL THE STORIES BEHIND
PRODUCTS
Communicating the story behind your products, and explaining the values
that define a luxury brand, is fundamental to effective luxury marketing.
19

USE FACEBOOK ADS TO REACH LUXURY SHOPPERS
Facebook Ads are one of the most effective forms of online advertising,
thanks to the high level of segmentation and targeting that you can do.
20

DON’T UNDERESTIMATE THE VALUE OF GOOD SEARCH
ENGINE OPTIMIZATION
Google is one of the most influential channels when it comes to helping
luxury shoppers find products, learn more about brands, and make their
purchase.
21

CREATE ASPIRATIONAL CONTENT TO EDUCATE
CUSTOMERS
One of the most effective ways to generate traffic and engagement is
create highly visual and aspirational content.
22

SUPPLY CONTENT THAT APPEALS TO PEOPLE’S DESIRE TO
DISPLAY THEIR STATUS
People talk about things, and spread word of mouth (online or offline) is to
display the traits that they want others to see in them.
23

CREATE A SENSE OF EXCLUSIVITY ONLINE
• Exclusivity is fundamental to luxury brand marketing as it maintains
consumer desire through scarcity and rarity.
• For luxury brands, the Internet does not represent wider distribution of
actual products. It’s a wider distribution of the content that evokes the
desire to buy luxury products.
• Exclusivity can be created online through private member groups,
concierge services, or digitally-delivered loyalty perks that are reserved
specifically for previous customers.
24

NEVER STOP BUILDING YOUR LIST
Email marketing is extremely effective for eCommerce marketing and
increasing customer loyalty, as it provides the opportunity to educate
consumers and tell them about new experiences or products offered by the
brand.
25

TAKE THE IN-STORE EXPERIENCE ONLINE, AND THE ONLINE
EXPERIENCE IN-STORE
• Talking about online and offline will be like talking about the benefits of
our left leg vs. our right leg. Both are integral to the other.
• One luxury brand who are leading the way in combining the in-store and
online experience is Burberry.
26

LUXURY SETS THE PRICE BUT NOT INVERSE
• In the case of a classic product or trading up, where the marketer tries
to find out at what price level there is room for a new product.
• In luxury, you first come up with a product, then you see at what price
you can sell it; the more it is perceived by the client to be a luxury, the
higher the price should be.
27

RAISE YOUR PRICES TO INCREASE DEMAND
• In the standard market model, when the price falls, demand rises. With
luxury, the relationship is reversed.
• For the luxury product, price is a mere technical detail.
• To live in luxury you have to be above others, not be ‘reasonable’.
luxury is ‘superlative’, not ‘comparative’.
• By increasing prices you lose the bad customers, but now you suddenly
become dazzlingly attractive to people who would previously not have
given you a second glance.
• Every person in the company in their own way is constantly trying to
find new ways of creating more value for the customer.
28

KEEP RAISING THE AVERAGE PRICE
• In traditional marketing, you launch a product at a skimming price, then
when competition comes onto the scene, you drop the price. In luxury it
is precisely the opposite.
• Luxury growth does not rely on running after a less well-heeled clientele
but on taking advantage of the global economic growth that is creating
thousands of new rich and very rich people throughout the world.
29

DO NOT SELL
• The luxury strategy is the very opposite of the volume strategy.
• If you pursue the strategy of systematically raising all your prices you
have to be prepared to lose sales and to lose customers.
• BMW USA : ‘When it comes to luxury, the best way of reaching the very
well-off is to let them come to you.’
30

KEEP STARS OUT OF YOUR ADVERTISING
• Using stars to promote luxury products is extremely dangerous.
• A luxury brand is courted by the stars, in the same way as those stars
are courted by journalists and paparazzi.
• Only brand domination, standing above everything like a god, is
acceptable, not simply behaving like any ordinary mortal.
31

CULTIVATE CLOSENESS TO THE ARTS FOR
INITIATES
• In traditional marketing, the brand seeks to appeal and to create an
affective relationship. The brand follows people’s tastes.
• The luxury brand is a promoter of taste, like art.
• Luxury is not a follower: it is creative, it is bold.
• Louis Vuitton has long been sponsoring concerts of contemporary
music, in this way they are making themselves patrons of emerging
trends.
32

DON’T RELOCATE YOUR FACTORIES
• Reducing cost prices is vital in the mass consumer markets, and this
often means relocating factories. Luxury management does not apply
this strategy.
• When someone buys a luxury item, they are buying a product steeped
in a culture or in a country.
• BMW, which is successfully pursuing a luxury strategy, builds all its
automobiles in Germany – apart from the entry line: the 3 Series – and
is keeping production of the Mini in the United Kingdom.
33

REFERENCE
• Kapferer, JN and Bastien, V. 2015. The luxury strategy, break
the rules of marketing to build luxury brands. Chapter 3, Anti-
laws of marketing
34

Merci from Paris.
Paris School of Business
+33 (0)1 53 36 44 00
www.psbedu.paris
59 rue Nationale
75013 Paris

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